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One of the benchmarks used by portfolio managers to help them value companies. it is calculated share price by its earning per share.
P/E is short for the ratio of a company’s share price to its per-share earnings. As the name implies, to calculate the P/E, you simply take the current stock price of a company and divide by its earnings per share. (EPS): P/E Ratio=Market Valueper ShareEarnings per Share (EPS)
For eg.
Suppose that a company is currently trading at $43 a share and its earnings over the last 12 months were $1.95 per share the p/E ratio for the stock could then be calculated as 43/1.95 or 22.05.EPs is most often derived from the last four quarters.
Price earning ratio is the ratio for valuing a company that measures its current share price related to its pre share earning
P/E ratio = market value per share / earning per share (eps)
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