Price Earnings Multiple Calculator
Price Earnings Multiple Calculator
Price Earnings Multiple Calculator helps calculating the Price Earnings Multiple
What is Price Earnings Multiple?
The Price Earnings Multiple (often shortened to the P/E ratio or the PER) is the ratio of a company's stock price to the company's earnings per share. The ratio is used in valuing companies.
The Formula of Price Earnings Multiple
Price Earnings Multiple = Price / Earnings
Example of Price Earnings Multiple
For example, if the market value of stocks equals 1,000,000 dollars and the net income equals - 100,000 dollars, the price/earnings ratio is 10
1,000,000 / 100,000
The Meaning is: an investor who buys the company for 1 million dollars, should wait for 10 years till he earns his money
The reason is - the company earns only 100,000 dollars per year.
interperating Price Earnings Multiple
A lower price/earnings ratio is better