Price Earnings Ratio

Last modified

Price Earnings Ratio

vgcalcs_6peratio.gif

The equation only takes into account share price and earnings so it is a limited measure of value. Nevertheless, it remains the most popular fundamental ratio out there today.

Price to Earnings (P/E) ratio is a measure of value.

A low P/E ratio stock is often viewed as unpopular or cheap whereas with a high P/E a stock is often viewed as expensive and popular.

The P/E ratio is calculated by divided the share price by earnings per share. This gives us a number.

In the P/E ratio model, the current P/E is multiplied by the forecast EPS to give a theoretical fair price based on forecast earnings discounted to its value in the present.

User Defined Parameters

Parameters that can be changed by users to change the selected formula's result include the following:

Forecast Earnings Per Share

This ratio is different for every share. It is populated using fundamental data from ValueGain's fundamental data provider based on an average of analyst's forecasts for the company.

Different analysts use different methodologies for calculating this prospective ratio.

Users can substitute their preferred analyst's ratio and recalculate the results.

Current P/E Ratio

This ratio is different for every share. It is populated using fundamental data from ValueGain's fundamental data provider.

However, different analysts use different methodologies for calculating this ratio.

Users can substitute their preferred analyst's ratio and recalculate the results.

Results

Fair Value

The Fair Value calculation results are displayed after the calculator name in the Calculator Selection List.

Users cannot directly alter the resulting Fair Value, however changing the highlighted parameters (yellow background and blue outline) will normally result in a change in results for that calculator and any other calculators that use those parameters.

Results in Table and Graphs

Some of the results for the individual stock can be displayed in tables and graphs in the Results Display area on the right side of the work page.

For a detailed description of these tables and graphs, go to the Results Display topic.

Page statistics
746 view(s) and 4 edit(s)
Social share
Share this page?

Tags

This page has no classifications.

Comments

You must to post a comment.

Attachments