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price to earnings ratio definition and how to calculate

price to earnings ratio definition and how to calculate

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Answer #1

PE Ratio is Price of a Stock relative to its Earnings. It also tells how much an investor is ready to pay for a given Earning. A high PE Ratio tell that the stock is over-valued. A low PE Ratio tells that the stock is undervalued. PE Ratio is measured as multiple or times. i.e. 10 times OR 20 times.

PE Ratio is caculated by the following formula : -

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