The price to earnings ratio (P/E)The price to earnings ratio (P/E) gives the relation between... More gives the relation between the stock priceWhat are value stocks? A value company is a company that app... More and the company’s earnings. It is calculated as follows:
P/E = price /
For example, if a company’s share has a current value of $40 and the earnings of one share over the past 12 months was $2, your P/E ratio would be 20.
P/E = 40 / 2 = 20
This shows that an is willing to pay $20 in orderWhat is a trade order? In trading, an order can be defined... More to make $1 of current earnings.
It is important for stock traders because normally a high P/E indicates that investorsWhat are value stocks? A value company is a company that app... More are expecting growth in the company’s earnings. As the price to earningsWhat are value stocks? A value company is a company that app... More ratio does not say much on its own, it is usually compared to P/Es within the same industry, to the marketWhat are value stocks? A value company is a company that app... More itself or against the company’s historical data.
Note that a minority of financial institutions use the abbreviation PER instead of P/E.
