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 ?
For generations, value investors have looked to the price-to-earnings ratio, or P/E, as a means to finding value stocks.
A bank like BNP Paribas trades at four times expected earnings for 2012, while in our worst-case scenario for next year, we get a price-to-earnings ratio of 7-8.
There have been upgrades to analysts'' earnings expectations for the third consecutive month, leaving estimates for earnings growth for the MSCI World next year at a healthy 26%, which translates into a price-to-earnings ratio of 14.
Those declines mean price-to-earnings ratios are dropping, too.
The price-to-earnings ratio is a valuation ratio of a company's current share price compared with its per-share earnings.
He looks for stocks with good earnings potential yet modest price-to-earnings ratios.
Lower price-to-earnings ratios, lower book values, higher dividend yields and a declining dollar are driving the performance of investments in emerging markets," says Holmes.
In the past two years, European financial-services companies have been doing the buying; spurred by huge market capitalization and high price-to-earnings ratios, said Mark A.
Lower price-to-earnings ratios and a declining dollar are driving the performance of investments in emerging markets.
Investors are taking another look at price-to-book and price-to-earnings ratios,'' said Daniel Eagan, a portfolio manager at Black Rock in Philadelphia.
Friess Associates manages growth equity portfolios with a discipline that focuses on companies whose earnings are typically growing by at least 20% per year and whose stocks sell at reasonable price-to-earnings ratios.
They say the trick in finding these potential gold mines is not to focus so much on traditional gauges like price-to-earnings ratios or profits but on sales growth and visionary leadership, among other less quantitative factors.