Price to Earnings Ratio P/E

[Durai007]

Hi Friends,

Can anyone help me with P/E ratio computation.

How to compare 2 companies with similar sector with related to P/E ratio.

Thanks in Advance,
Durai007

 

[rvm123]

p/e ratio is price to earnings (per share) ratio. this is calculated by dividing MARKET PRICE of a scrip by EPS. Lesser the p/e ratio, the scrip is under priced. So within an industry, if a company is having lesser p/e, that may be considered as underpriced.

 

[AW10]

if PE for a company is lower then its peer, that should alert you on
- why market players are not paying for this stock and buying it more?
- Are market professionals are not smart enough to see this opportunity ?

In most of the cases, there are some or other issues with the company hence it is underpriced. IMO, you can't take your investment decision just based on PE. You need to look at more factors.

All the best.

 

[suremover]

You can possibly look at few other factors:
1) Debt structure of the company? Does it have very high debt?
2) Perfromance- Is revenue growing? Is Profit growing? Is Opex/ capex going?
3) Is the company investing heavily into new capabilities/infra- Betting big on something?
4) Litigations on the company?
5) Long term view of the industry?

probably based on above a low P/E maybe justified for a company!

 

[amitvjog]

How to search for the litigation against the company, as litigation for many companies may not be in the news.

 

[aryan.]

How to search for the litigation against the company, as litigation for many companies may not be in the news.

Annual Report and Quarterly statements.