PRICE EARNING RATIO

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Rahul Bansal (Querist)

23 January 2010 For determining the value of a share on the basis of price earning ratio, information is required regarding......................

Ankur Garg

Ankur Garg (Expert)

26 January 2010 The P/E looks at the relationship between the stock price and the companyâ€™s earnings.

The P/E is the most popular metric of stock analysis, although it is far from the only one you should consider.

You calculate the P/E by taking the share price and dividing it by the companyâ€™s EPS.

P/E = Stock Price / EPS

For example, a company with a share price of $40 and an EPS of 8 would have a P/E
of 5 ($40 / 8 = 5).

What does P/E tell you? The P/E gives you an idea of what the market is willing to pay for the companyâ€™s earnings. The higher the P/E the more the market is willing to pay for the companyâ€™s earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stockâ€™s future and has bid up the price.

Conversely, a low P/E may indicate a â€œvote of no confidenceâ€ by the market or it could mean this is a sleeper that the market has overlooked. Known as value stocks, many investors made their fortunes spotting these â€œdiamonds in the roughâ€ before the rest of the market discovered their true worth.

What is the â€œrightâ€ P/E? There is no correct answer to this question, because part of the answer depends on your willingness to pay for earnings. The more you are willing to pay, which means you believe the company has good long term prospects over and above its current position, the higher the â€œrightâ€ P/E is for that particular stock in your decision-making process. Another investor may not see the same value and think your â€œrightâ€ P/E is all wrong.

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Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 THANKS ANKUR

Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 If the price paid by the holding company for the shares acquired in the subsiduary company is more than the intrinsic value of the shares acquired, the difference is treated as.........................

Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 CAN ANYONE GAVE EXACT ANSWER

Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 IS THIS QUESTION A DIFFICULT ONE........?

Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 NO ANSWER

Rahul Bansal

Rahul Bansal (Querist)

27 February 2010 IF ANYONE ANSWER........LET ME KNOW IN MY PM AS WELL....