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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 ?
New York City has been a place where brands can justify opening multiple shops strategically," added Cohen, who has experience working with H&M, John Varvatos and Old Navy, as well as a Nordstrom concept store in Manhattan's Soho.
The increase in TRCI was above the average in electrical household appliances, textiles and motor vehicles while it was below average in furniture and large multiple shops.
"If allowing shops within shops becomes the norm, then what's to stop multiple shops within shops and eight, 12, 16 machines within an enlarged 'mother' shop?" The Gambling Commission does not comment on individual cases, but the Luton instance is a matter for the local authority, which acts on its guidance.
As operators move to owning multiple shops, their information is usually restricted to what they can get at the local level.
This spectacular world-class lakefront mountain resort will feature a five-star hotel, full and fractional ownership condominiums, spa and fitness facilities, conference centre, world-class casino and interpretive centre, organic micro-brew pub, restaurants and nightclubs, cinemas, show theatre as well as multiple shops and boutiques.
One fat cat can pay himself a billion pounds in remuneration for filling our historic towns with faceless multiple shops selling cheap goods made in the sweatshops of the Far East.

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