The P/E ratio is a useful tool for investors to assess the potential value of a company.
What is a P/E ratio?
The P/E ratio (Price-to-Earnings ratio) is a measure used by investors and analysts to assess the current value of a company relative to its earnings.
What are Forward P/E and Trailing P/E?
Forward P/E and Trailing P/E are the two most common P/E ratios. Forward P/E is the ratio of a companyâ€™s current share price to its expected earnings over a specific period of time. Trailing P/E is the ratio of a companyâ€™s current share price to its actual earnings over the same period of time.
How is P/E ratio calculated?
The formula for calculating P/E ratio is: P/E ratio = Stock Price / Earnings Per Share.
Calculation of P/E Ratio
The P/E ratio is calculated by dividing the price of a stock by its earnings. This is the most common way to calculate this ratio.
The P/E ratio is typically calculated using the current price of a stock. This can be used to measure the valuation of the stock in the present moment.
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