The P/E ratio is calculated by dividing the market value price per share by the company's earnings per share. Earnings per share (EPS) is the amount of a company's profit allocated to each outstanding share of a company's common stock, serving as an indicator of the company's financial health.
Multiply the industry average P/E ratio by the stock's EPS to estimate the price at which the stock would trade if its P/E ratio equaled the industry average. In general, companies in the same industry tend to trade at similar P/E ratios.
The P/E ratio is calculated by dividing a company's current stock price by its earnings per share (EPS). If you don't know the EPS, you can calculate it by subtracting a company's preferred dividends paid from its net income, and then dividing the result by the number of shares outstanding.
P/E = (Stock Price) / EPS =
Generally, the higher the P/E ratio, the more investors are willing to pay for a dollar's worth of earnings from a company. High P/E stocks (typically those with a P/E above 30) tend to have higher growth rates and/or the expectation of a profit turnaround.
A high P/E typically means a stock's price is high relative to earnings. A low P/E indicates a stock's price is low compared to earnings and the company may be losing money. A consistently negative P/E ratio run the risk of bankruptcy.
About PE Ratio (TTM)
Tesla has a trailing-twelve-months P/E of 144.24X compared to the Automotive - Domestic industry's P/E of 15.62X. Price to Earnings Ratio or P/E is price / earnings. It is the most commonly used metric for determining a company's value relative to its earnings.
According to NYU's Stern School, as of January 2019 and using trailing 12-month data, the average P/E ratio of the retail sector is 20.54. This value ranges from a low of 11.74, which is the average of automotive retail companies, to a high of 38.96, which is the average of online retail companies.
Generally speaking, a “good” EPS should be a positive figure that has a long track record of consistent growth. As an example, a company's earnings-per-share that has been growing substantially faster than its competitor's EPS can be considered great.
The result is assigned a rating of 1 to 99, with 99 being best. An EPS Rating of 99 indicates that a company's profit growth has exceeded 99% of all publicly traded companies in the IBD database.
The most well-known valuation metric is the P/E ratio. If for example, a company is trading at a lower P/E than its competitors, this may indicate that the stock is undervalued, whereas a higher P/E would reveal that the stock may be overvalued.
Author | Broadcaster | Journalist | Commentator | Speaker. Investors in iconic electric vehicle company Tesla TSLA +0.1% should take heed: The stock is overvalued. And its not just a little pricey.
P/E Ratio is calculated by dividing the market price of a share by the earnings per share. P/E Ratio is calculated by dividing the market price of a share by the earnings per share. For instance, the market price of a share of the Company ABC is Rs 90 and the earnings per share are Rs 10. P/E = 90 / 9 = 10.
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