Price/earning ratio (p) is another measurement which are of particular interest to investors in public enterprises. P ratio gives you an idea of how much you earn the current price of shares shares for every dollar paid. Gain is the market value of stock shares, not the carrying amount of the shares in respect of the shares as shown in the balance sheet.
(P) ratio is a reality check on how high the current market price is relative to the underlying profit earning your business. Extremely high p ratios are only justified when investors believe that the company's earnings per share (EPS) is very optimistic about the opportunities in the future.
P ratio is calculated to the current market price of the stock divided by the latest trailing 12 months diluted EPS. Shares share prices bounce around day to day and is subject to major changes in the short term. The current p ratio and compared with the average actual p to measure or company that sells above or below average in the market.
P key is currently high despite a four-year decline in the stock market. P ratios vary from industry to industry and from year to year. One dollar of EPS can command only $ 10, the market value of a mature company in a no-growth industry, while a dollar of EPS in a dynamic company in growth industry a market value of $ 30 per dollar of income or net income might have.
In short, is the price/earnings ratio, or p ratio between the current market price of the shares in the capital, divided by its trailing 12 months diluted earnings per share (EPS) earnings per share, or if the activities are not diluted EPS reports. A low p a underbalued inventory or a pessimistic forecast of investors. A high p can reveal an overvalued stock or could be based on an optimistic forecast of investors.
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