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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
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. In stock-index futures, the number multiplied by the futures price to determine the value of the contract. For example, the $500 multiple of the Standard & Poor's Midcap Index is multiplied by the futures price to determine the value of one contract. Thus, a futures price of $230 would yield a contract value of $115,000 ($500 × $230).
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.


A stock's multiple is its price-to-earnings ratio (P/E). It's figured by dividing the market price of the stock by the company's earnings.

The earnings could be the actual earnings for the past four quarters, called a trailing P/E. Or they might be the actual figures for the past two quarters plus an analyst's projection for the next two, called a forward P/E.

Investors use the multiple as a way to assess whether the price they are paying for the stock is justified by its earnings potential. The higher the multiple they are willing to accept, the higher their expectations for the stock.

However, some investors reject stocks with higher multiples, since it may be impossible for the stock to meet the market's expectations.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
However, one can help the offender at his or her current stage in life by providing well-designed and implemented programs that reduce multiple risk factors.
(19) Given that adolescents with disabilities experience higher rates of injury, (5) engage in more individual risk behaviors, (3,14-18) and that risk behavior (both individual and multiple) is positively associated with gradients in injury in general student populations, examination of the relationship between multiple risk behavior and injury among students with disabilities is warranted.
Synthesis Analysis combines risk factors such as hypertension and smoking into one multiple risk factor equation for heart disease.
All participants had histories with multiple risk factors such as family disruption, domestic violence, parental psychopathology or substance abuse, maltreatment, poverty, educational failure or expulsion, legal involvement, and mental illness.
The model also supports multiple Risk Outlooks, including an expected outlook based on the current consensus view of the terrorism threat, as well as alternative outlooks reflecting plausible changes to the terrorism environment that could increase or decrease risk.
* Below 100-130--for those at moderate risk (multiple risk factors).
European authorities are also concerned at the presence of furan since the substance represents a serious and multiple risk to human health.
Studies such as the Multiple Risk Factor Intervention Trial (MRFIT), an epidemiologic study of 316,099 men with an average follow-up of 12 years, have shown that even mild-to-moderate levels of both hypertension (systolic blood pressure [SBP] 132-141 mm Hg) and dyslipidemia (total cholesterol 221-244 mg/dL) can impart risk for coronary heart disease (CHD) that is similar or greater than that due to severe elevations of either risk factor alone?
The Ugandan government's programme has been comprehensive and has proven the benefits of promoting multiple risk reduction strategies.
Youth who are faced with multiple risk factors will receive the resources and support necessary to reduce their risk of becoming involved in criminal behaviour or of becoming victims of crime.
Changes in serum creatinine were observed very commonly in patients with pre- and post-transplantation lamivudine-resistant liver disease and multiple risk factors for changes in renal function who were treated with Hepsera for up to 129 weeks, with a median time on treatment of 19 and 56 weeks, respectively.

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