price-earnings ratio(redirected from Price to Earnings Ratio)
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Related to Price to Earnings Ratio: Earnings per share, Dividend yield, Price to sales ratio, Forward Price to 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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
price-earnings ratioa 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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
price-earnings ratioa 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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005