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Valuation
Also called: PE ratio, Price to earnings, Price-earnings ratio, P/E
The P/E (price-to-earnings) ratio is a company's share price divided by its earnings per share over the last twelve months. It tells you how many rupees the market is paying for one rupee of the company's yearly profit.
P/E = Share price ÷ Earnings per share (trailing 12 months)
A share trades at ₹500 and the company earned ₹25 per share over the last four quarters. Its P/E is 500 ÷ 25 = 20, so buyers are paying ₹20 for every ₹1 of annual profit.
It is the quickest way to ask whether a share price is modest or demanding relative to what the business actually earns.
A high PE means the market expects profits to grow; a low one means it does not, or that it distrusts the profits. Neither is automatically good — a cheap company is often cheap for a reason.
| Below 15 | Modest. Common in slow-growing or out-of-favour businesses. |
|---|---|
| 15 to 30 | Ordinary for a steadily growing company. |
| 30 to 60 | Demanding. Growth has to arrive for this to make sense. |
| Above 60 | Very demanding, or profits are temporarily depressed. |
Rough conventions for an ordinary company; sectors differ. A range is not a buy or sell level.
The P/E (price-to-earnings) ratio is a company's share price divided by its earnings per share over the last twelve months. It tells you how many rupees the market is paying for one rupee of the company's yearly profit.
P/E = Share price ÷ Earnings per share (trailing 12 months). A share trades at ₹500 and the company earned ₹25 per share over the last four quarters. Its P/E is 500 ÷ 25 = 20, so buyers are paying ₹20 for every ₹1 of annual profit.
No. P/E ratio describes one aspect of a company, a price or a contract, and it is best read alongside other numbers and the business itself. Jivani Markets is a research and education platform; it does not give buy, sell or hold recommendations.