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