Relative PE

Relative PE

A firm or industry's price to earnings ratio divided by the market price to earnings ratio.

Relative PE

The price-earnings ratio of a company compared to other companies in the same industry or other companies of the same size. The relative PE is useful in helping people make investment decisions. One may desire a higher relative PE or a lower PE, depending on one's investment strategy.
References in periodicals archive ?
3M (MMM) upgraded to Outperform from Sector Perform at RBC Capital with analyst Deane Dray saying the 4-month decline in the stock price has taken its valuation to its historical relative PE support level.
Based on dividend capitalization, Holt presents a model for determining the appropriate relative PE ratio for a growth stock as compared to other stocks, whereas Malkiel presents an independent approach for valuing a growth stock relative to a non-growth stock.
(A relative PE is the ratio of a firm's PE to the average PE of the market.) Two-thirds of the big spenders had lower than average relative PEs.
Half of these firms had lower than average relative PEs.
We also included company size, the time and absolute PE interaction, and the time and relative PE interaction as control variables.
[Z.sub.2ij] = the relative PE of accountant i in time block j (See Lazear 1999) (-2 [less than or equal to] [Z.sub.2ij] [greater than or equal to] 2): the relative PE is measured as the difference between accountant I's performance evaluation in time block j and the average PE of all accountants at a given rank in a given company in time block j (i.e., [Z.sub.ij] - Z), (4)
[Z.sub.5ij] = the interaction of time to promotion and relative PE, computed like [Z.sub.4ij], but substituting relative for absolute performance; and
We used the relative PE measures at the staff and senior rank (i.e., [Z.sub.2ij] and [Z.sub.ij]) to test H5.
In our archival data, a larger increase in promotion probabilities for absolute PEs, and a smaller increase in promotion probabilities with relative PEs, will provide evidence that is consistent with a work-life based promotion process.