What is P/E ratio? What is a normal ratio? Is a higher/lower P/E better?
by 
Masculinist
ANSWERS: 2
-
A high PE ratio is considered to be better (obviously will vary with industry). Investors consider buying a stock that has a high share price despite having low earnings i.e. EPS. A high share price would indicate a good future earning potential! A very basic understanding of the PE ratio would be :- PE ratio can be seen as how much an investor is willing to pay for the earnings of a company so lets consider a company A which has a share price of £10 with an EPS of lets say £2 then the PE ratio of £5 indicates that for every single £1 of profit the company makes, an investor would be prepared to pay £5 - hence share price is £10. This reflects the level of confidence in the company
-
P/E ratio = Price per Share / Annual Earning per share A higher P/E ratio means that investors are paying more for each unit of income. Thanks Ben http://www.tivamo.com
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC