Financial Terms / pe ratio

# What is the P/E Ratio?

The P/E ratio is a useful tool for investors to assess the potential value of a company.

## Formula

``PE = Current Market Price / EPS``

## How do I calculate the pe ratio?

`It is important for investors and analysts to understand how to calculate P/E ratio in order to make informed decisions about investments. The most common types of P/E ratios are the forward P/E and trailing P/E. The forward P/E ratio can be calculated by `dividing the current market price of a company's stock by its expected earnings per share (EPS) over the next 12 months.` For example, if a company's stock is currently trading for \$10 and its expected EPS for the next 12 months is \$1.50, then the forward P/E ratio would be 6.67 (10/1.50). It is important to note that the P/E ratio is only a measure of a company's valuation and should not be used as the sole determinant when making investment decisions.`

## What is a P/E ratio?

`The P/E ratio (Price-to-Earnings ratio) is a measure used by investors and analysts to assess the current value of a company relative to its earnings.`

## What are Forward P/E and Trailing P/E?

`Forward P/E and Trailing P/E are the two most common P/E ratios. Forward P/E is the ratio of a companyâ€™s current share price to its expected earnings over a specific period of time. Trailing P/E is the ratio of a companyâ€™s current share price to its actual earnings over the same period of time.`

## Key Points

How do I calculate pe ratio?
`PE = Current Market Price / EPS`
Calculation of P/E Ratio
The P/E ratio is calculated by dividing the price of a stock by its earnings. This is the most common way to calculate this ratio.
Current Price
The P/E ratio is typically calculated using the current price of a stock. This can be used to measure the valuation of the stock in the present moment.