What PE ratio or Price to Earning Ratio)
PE ratio or price to earning ratio is most important for analysis of stock. PE ratio or price to earning share relate with current share price of the company with Earning per share or EPS.
PE ratio are the most important tool for investors and analysts to determine company valuation and comparison in the same industry. Sometime price to earning ratio or PE ratio are also known as earning multiple or price multiple. High PE ratio mean company is overvalued and low PE ratio mean company is undervalued or something wrong in company. Some companies show a PE ratio in the negative, it means there is no earnings in the company or it may be a loss making company so EPS or earnings per share are also in negative.
There are two type of PE ratio
- Forward PE ratio
- Trailing PE ratio
Forward PE ratio-
Forward PE ratio or Price to earning ratio show future earning, sometimes its defined as estimated price to earning ratio. It is used for forecast PE ratio and compared with current PE ratio.
Trailing PE ratio-
Trailing PE ratio or price to earning ratio show past earring of the company over the past 12 months. Investors are both comparing Forward and trailing PE ratio. If the Forward PE ratio is less than Trailing PE ratio then it assumes the company increases profit. If the Forward PE ratio is more than Trailing PE ratio it assumes decrease in profit.
PE ratio formula
Investors and analysts review the company on the basis of the PE ratio of the company. PE ratio price to earning ratio formula defined as current stock price divided by Earning per share or EPS.
PE ratio in stock market
Every company listed on the Stock market shows a PE ratio. It is easy to review the company and compare it with the same industry. It is overvalued or undervalued. If industry PE ratio is more than company PE ratio then company stock priced considered as undervalued or if industry PE ratio is less than Company PE ratio then it is considered as overvalued. PE ratio in the stock market are easily avalive on many websites or you can find them by using the PE ratio formula.
PE ratio calculator online
By clicking on this link you can calculate PE ratio, forward PE ratio and CAGR. This is easy way to calculate PE ratio online. It easily to download PE Ratio calculator online.
Stocks with lowest PE ratio
There are many company stocks with the lowest PE ratio. But that does not mean PE ratio stocks are lower PE ratio stocks are undervalued. Sometime companies not making profit over the past 12 months it’s also the reason of Stocks with the lowest PE ratio.
Here are some companies lists of stocks with lowest PE ratio
YES Bank Ltd.
B C Power Controls Ltd.
Uniply Industries Ltd.
Goldstone Technologies Ltd.
Khandwala Securities Ltd.
Sadbhav Infrastructure Project Ltd.
Example of PE ratio of sbi
For example, let’s calculate PE ratio sbi, In 4 june 2020 the stock price of sbi is nearly 184.70 on NSE and EPS(TTM) of sbi is 16.23. So simply divide the stock price of sbi with EPS(TTM).
PE ratio or price to earning ratio of sbi equal to 184.70 divided by 16.23. We get a 11.38 PE ratio of SBI.
This short article on PE ratio or price to earning ratio for beginner guide, to understand basic concept and formula, also helps in calculating PE ratio.