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#1
18th October 2006, 11:08 AM
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Basics.. EPS, P/E
Hello Gurus,
Sorry this may be a basic question but I dont understand these terms and how they are calculated. Earning Per Share (EPS) P/E - ? How is this related with EPS and how to identify companies strength from this. Also B/V ... ?? Sudharsan 
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#2
20th October 2006, 11:13 PM
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Re: Basics.. EPS, P/E
Hi,
I am not an expert myself but I know few things ... If you look at a company's annual report, you can find out what is the total number of equity shares that they have issued. And if you look at the results announced by them, you can find out the net earnings of the company. EPS is Earnings per Share and it is the ratio of total earnings and number of shares outstanding. P/E is Price/Earning per Share or P/EPS. Price is the current market price of one share. You divide this market price by earnings your company has made and you reach the figure of P/E. Basically this would mean that the current trading price is P/E times the earnings per share of the company. Example Market Price: 10 Earnings: 100 No of shares outstanding: 100 EPS = 100/100 = 1 P/E = Market Price / EPS = 10 / 1 = 10 So basically we are paying 10 rupees for a company that is making one rupee per share. Or we are rating this company at 100% premium ... !
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#3
3rd November 2006, 09:14 PM
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Re: Basics.. EPS, P/E
Hi,
I just read my old post. I have the following clarifications to give ... Market Price: 10 Earnings: 100 No of shares outstanding: 100 EPS = 100/100 = 1 P/E = Market Price / EPS = 10 / 1 = 10 So basically we are paying 10 rupees for a company that is making one rupee per share. Or we are rating this company at 100% premium ... ! I AM NOT SURE ABOUT THE UNDERLINED PART. CAN SOMEONE CLARIFY ON THIS? Quote:
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#5
4th November 2006, 07:19 PM
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Re: Basics.. EPS, P/E
P/E is calculated by taking the share price and divided by the company's EPS.
It indicates what the market is willing to pay.The higher the P/E the marke is willing to pay higher for it's earnings. In some cases high P/E can also indicate overvalued stock.
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