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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


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).


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.

References in periodicals archive ?
Cynog-Jones, the USDAW research officer who is accompanying the retail trades productivity team on its American tour, estimates that assistants in 8,500 privately owned multiple shops get their coats, overalls or aprons provided by their firms.
Contents: Food Suppliers and Manufacturers with named industry buyers and decision makers; Food Retailers including Multiple Shops, Out-of-Town Shopping, Department Stores, Mail Order and much more; Food Industry Sector includes Plant and Equipment Manufacturers, Packaging Machinery, Hygiene Product and Equipment Suppliers, Packaging Materials, Storage, Handling and Distribution; Ingredients Suppliers; Wholesalers and Distributors; Consultants and Research Organisations; Trade Associations, Trade Journals, Exhibitions and Fairs; Government Institutions.
a "mystery shopper" program that involves multiple shops of each campus annually;
Offenders range from the desperate and vulnerable to snatch-and-run thieves or organised crime gangs that can target multiple shops in a single stealing spree.
We are working with 11 charities and social enterprises across Wales, some of whom have multiple shops across our regions.
Betfred will enjoy a fully integrated TurfTV/SIS service similar to that at Ladbrokes, Hills and Coral, which means around 7,000 big multiple shops have the service, leaving smaller independents seriously disadvantaged.

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