Q. Calculate the Price earnings ratio?
Price earnings (PE) ratio
PE = (Market share price/EPS) (no. of times)
The PE ratio is most widely quoted investors' ratio. It tells the market confidence in a company by taking the current market share price in relation to the most recent EPS. A high PE ratio indicates good growth prospects. PE ratios of many industries are available as published information. If the PE and EPS are known, the share price of a company can be established as follows:
Share Price = EPS x PE ratio
This is useful when valuing shares for unlisted companies, by taking an industry similar PE ratio.