P/E Ratio



___The Price/Earnings Ratio is one of the most broadly watched measures of valuation for both the stock market as whole and individual stocks. Many people use it to determine whether the market (or a given stock) is "expensive" or "cheap"


current market price of the stock
= --------------------------------------
earnings per share

For example, a company with a share price at RS 160 and an EPS of 8 would have a P/E of 20 (160 / 8 = 20).

The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most well-liked stock analysis ratio, although it is not the only one you should consider.

stocks with P/E below about 12 are considered "low" stocks with P/E above about 40 or 50 are considered "high” , in absolute terms. A P/E's significance.


3 comments:

easystockbasics said...

yes, PE is the major tool for me while picking the stocks for long term. because they tell whether the stock is available at cheaper prices or overbought.

one case study is hindustan unilever stock, even in bull market many long term investors are got lossed by it, simply because they picked the stock at very high PE ratios.

so always beware while investing in high PE stocks, even the stock belongs to such a giant company. but also avoid picking stocks only considering PE, as many week base, likely to loss in future companies are available in very low pe ratio.

be aware, get good returns.

easystockbasics said...

yes, PE is the major tool for me while picking the stocks for long term. because they tell whether the stock is available at cheaper prices or overbought.

one case study is hindustan unilever stock, even in bull market many long term investors are got lossed by it, simply because they picked the stock at very high PE ratios.

so always beware while investing in high PE stocks, even the stock belongs to such a giant company. but also avoid picking stocks only considering PE, as many week base, likely to loss in future companies are available in very low pe ratio.

be aware, get good returns.

Suhani Varma said...

Nice info and rare to read kindly give some more info about different topics Nifty tips