price-earnings ratio

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Price-earnings ratio

Shows the multiple of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio are determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher multiple means investors have higher expectations for future growth, and have bid up the stock's price.

Price-Earnings Ratio

The price of a security per share at a given time divided by its annual earnings per share. Often, the earnings used are trailing 12 month earnings, but some analysts use other forms. The P/E ratio is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. It is also a measure of expected, but not realized, growth. Companies expected to announce higher earnings usually have a higher P/E ratio, while companies expected to announce lower earnings usually have a lower P/E ratio. See also: PEG

price-earnings ratio (P/E ratio)

A common stock analysis statistic in which the current price of a stock is divided by the current (or sometimes the projected) earnings per share of the issuing firm. As a rule, a relatively high price-earnings ratio is an indication that investors believe the firm's earnings are likely to grow. Price-earnings ratios vary significantly among companies, among industries, and over time. One of the important influences on this ratio is long-term interest rates. In general, relatively high rates result in low price-earnings ratios; low interest rates result in high price-earnings ratios. Also called earnings multiple, market multiple, multiple, P/E ratio. See also forward P/E, trailing P/E.

price-earnings ratio

a ratio used to appraise a quoted public company's profit performance, which expresses the market PRICE of the company's SHARES as a multiple of its PROFIT. For example, if a company's profit amounted to £1 per share and the price of its shares was £10 each on the STOCK MARKET; then its price-earnings ratio would be 10:1. Where a company's prospects are considered by the stock market to be good, then it is likely that the company's share price will rise, producing a higher price-earnings ratio. Price-earnings ratio is the mirror image of EARNINGS YIELD. See EARNINGS PER SHARE.

price-earnings ratio

a ratio used to appraise a quoted public company's profit performance that expresses the market PRICE of the company's SHARES as a multiple of its PROFIT. For example, if a company's profit amounted to £1 per share and the price of its shares was £10 each on the STOCK EXCHANGE, then its price-earnings ratio would be 10:1. Where a company's prospects are considered by the stock exchange to be good, then it is likely that the company's share price will rise, producing a higher price-earnings ratio. The price-earnings ratio is the mirror image of EARNINGS YIELD. See EARNINGS PER SHARE.
References in periodicals archive ?
With an average price-earnings ratio of six, Ghalibaf Asl said Iranian stocks are attractive to investors inside and outside the country -- even if Iran faces major geopolitical uncertainties and the constant risk of more sanctions.
While one could simply dismiss this observation as irrelevant to outside investors, the historical record suggests that top executives may be on to something: over longer time periods, stocks with low price-earnings ratios and low market-to-book ratios have outperformed the more glamorous issues characterized by high valuation ratios.
By themselves, price-earnings ratios are not only meaningless as predictors of market value or the fairness of market prices, they can lead investors into misperceptions of which alternatives provide the most attractive returns for their available funds.
Stock prices became unhinged from reality; average price-earnings ratios exceeded 60 (in the United States P:E ratios of 20 are considered high).
As a result, conventional price-earnings ratios hit a peak of more than 70 in August 1987, which was about three to five times the PE ratios in other major markets.
Seneca Capital's approach generates portfolios that have low price-earnings ratios on long-term projections and superior short-term earnings momentum.
In addition to acknowledging Schwab for giving investors a full range of investment services as well as a variety of ways to access them, Barron's reviewer, Theresa Carey, gave the company credit for upgrades made to its research and planning tools, noting that Schwab "allows you to generate reports by typing commands in plain English," and to further "customize reports by asking for specific information such as analyst ratings or price-earnings ratios.
While entertainment software companies consistently show revenue and earnings growth and boast price-earnings ratios stronger than most technology companies, their stock prices remain comparatively low, Halpern said.
For example, the Japanese stock market places very high price-earnings ratios on Japanese equities, and some have argued that the resulting lower cost of equity capital gives Japanese firms a competitive edge over U.