Nov 17, 2018

PE Ratio Meaning - How to Calculate PE Ratio Formula

PE Ratio Meaning ,PE Ratio Formula

PE Ratio Meaning

PE ratio or Price Earnings ratio of the company is calculated based on the EPS or Earning Per Share and the current market price of a share.

it is considered if the PE ratio of the company is high then it indicates the company is not performing well(in many cases).

the PE ratio of a Company analyzes in a different manner based on the Industry of the company.

so where the PE ratio is low, it is considered that the company is performing well.

and the company is generating profits(in many cases not based on the industry).

PE Ratio Formula

PE ratio is calculated using the EPS or Earnings per share and the current market price of the company.

Let's assume the company "ABC" which market price is 100 Rupees (or your country currency).

and it's EPS is 20 rupees

so the PE ratio of that company share will be

Market Price / Earnings Per Share 

100 Rupees / 20 Rupees = 5

in this case of company "ABC", the PE ratio will be 5.

hope you have understood the PE ratio Meaning and how to calculate the Price Earnings ratio.

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