How do you calculate the PE ratio?

Calculation: PE Ratio = Price Per Share/ Earnings Per Share. The trailing price-to-earnings ratio is based on past earnings, while the forward price-to-earnings ratio depends on the forecast of future earnings. The analysts correlate a company’s PE multiple with the PE multiples of competition within the industry.

What is a good PE ratio?

A “good” P/E ratio isn’t necessarily a high ratio or a low ratio on its own. The market average P/E ratio currently ranges from 20-25, so a higher PE above that could be considered bad, while a lower PE ratio could be considered better. However, the long answer is more nuanced than that.

What is the formula for the P/E ratio?

Calculating the P/E ratio involves dividing the latest closing share price by its earnings per share, with the EPS calculation consisting of the company’s net income (“bottom line”) divided by its total number of shares outstanding. Earnings Per Share (EPS) = Net Income ÷ Total Number of Diluted Shares Outstanding

What is the difference between the P/E ratio and the CAPE ratio?

The CAPE ratio is a variation of the Price-to-Earnings (P/E) ratio. Similar to the P/E ratio, the CAPE ratio aims to indicate whether a stock is undervalued or overvalued. The CAPE ratio allows the assessment of a company’s profitability over different periods of an economic cycle.