P/E Ratio explained in Tamil | Price by Earnings Ratio | Investment Talks

Understanding the Price by Earnings Ratio

The price-to-earnings (P/E) ratio is a first and best ratio used to evaluate a company's valuation by comparing its current share price to its earnings per share (EPS).

Definition and Formula
The P/E ratio is calculated by dividing the market value per share of a company by its earnings per share (EPS). The formula is simple:
P E = Market Value per Share / Earnings per Share

Understanding the P/E Ratio

High P/E Ratio: Indicates an overvalued stock or investors' expectations of high growth rates. Companies with high P/E ratios are often expected to have increased revenue in the future, leading to a surge in their current stock prices.

Low P/E Ratio: Suggests an undervalued stock or that the company is doing exceptionally well relative to its past trends. Low P/E ratios can indicate that a company is undervalued and may be a good investment opportunity.

No Earnings or Negative Earnings: Companies without earnings or with negative earnings do not have a P/E ratio.

Types of P/E Ratios

Trailing P/E Ratio: Relies on past performance, providing a more accurate and objective view of a company's performance

Forward P/E Ratio: Uses future earnings guidance, providing insights into a company's expected performance and growth rate.


PEG ratio explained
   • P/E Ratio தெரியும். PEG Ratio....?  

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