Connect With Us
Register
Login
P/E ratio definition
P/E ratio (price-to-earnings ratio) is a stock valuation metric that compares a company's share price with its earnings per share. It shows how much investors pay for each unit of a company's earnings.
A higher P/E ratio can signal stronger growth expectations or an expensive valuation. A lower P/E ratio can signal a cheaper valuation or weaker business expectations. The metric is most useful for comparing companies in the same industry.
Trailing P/E uses earnings from the past 12 months, and forward P/E uses expected future earnings. The ratio breaks down for companies with negative earnings, where it returns no meaningful figure.
P/E ratio Example
A company's stock trades at USD 60 per share and reports earnings per share of USD 4. You work out the P/E ratio:
P/E ratio = share price √∑ earnings per share
USD 60 √∑ USD 4 = 15
The stock trades on a P/E of 15, so investors are paying USD 15 for every USD 1 of company earnings.
The information provided on this website is of a general nature only and does not constitute personal financial advice. Before acting on any information on this website, you should consider the suitability of the information in relation to your objectives, financial situation and needs. Investing in CFDs and FX Margin Contracts carries significant risks and is not suitable for all investors. You may lose more than your initial deposit. You do not own, or have, any interest in the underlying asset. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. It is important that you read and consider the disclosure document before you acquire any product listed on the website. The information and advertisements offered on this website are not intended for use by any person in any country or jurisdiction where such use would be contrary to local laws and regulations. The Products and Services offered on this website are not intended for residents of the United States, Malaysia and Thailand.
TMGM is authorized and regulated in various jurisdictions.
Trademax Australia Limited, trading as TMGM, is regulated by the Australian Securities and Investments Commission (ASIC), AFSL no. 436416 and is located at Level 28, One International Tower, 100 Barangaroo Avenue, 2000 Sydney, NSW Australia.
Email: support@tmgm.com.au
Trademax Global Limited, trading as TMGM, is authorized and regulated by the Vanuatu Financial Services Commission (VFSC), registration number 40356 and registered at 1276, Kumul Highway, Port Vila, Vanuatu, Republic of Vanuatu.
Email: support@tmgm.com
Trademax Global Markets (SE) Limited, trading as TMGM, is authorized and regulated by the Financial Services Authority (FSA) of Seychelles, with license number SD224. The company is registered at Office No 13, Providence Estate ABIS Centre, Mahe, Seychelles.
Email: support@tmgm.com
Trademax Global Markets (International) Pty Ltd, trading as TMGM, is authorized and regulated by the Financial Services Commission, Mauritius (FSC) with license no. GB22201012, and registered at 33, Edith Cavell Street C/o IQ EQ Fund Services (Mauritius) Ltd Port Louis, 11324 Mauritius.
Email: support@tmgm.com
Copyright © TMGM. All rights reserved