Price talk and Price to earnings ratio: Difference between pages
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(PER). The ratio of the equity value of a company to its accounting earnings (profit after tax). | |||
The PER can be calculated either on a per-share basis or on the total equity value and total earnings, giving identical results. | |||
Per share: PER = Current share price ÷ Earnings per share. | |||
On total values: PER = Total equity value ÷ Total earnings. | |||
For example if Company A's total equity value is $630m and its relevant earnings are $63m, the PER = $630m/$63m = 10. | |||
In another case if comparable PERs for an unlisted Company B are 12, and its relevant earnings are $10m, the total value of Company B's equity can be estimated on this basis as 12 x $10m = $120m. | |||
Sometimes written as ''P/E ratio'' or ''PE ratio''. | |||
Also known as price earnings ratio. | |||
== See also == | == See also == | ||
* [[ | * [[Bootstrap effect]] | ||
* [[ | * [[Earnings multiples]] | ||
* [[ | * [[Earnings per share]] | ||
* [[Earnings yield]] | |||
* [[Historic]] | |||
* [[Multiples valuation]] | |||
* [[Prospective]] | |||
* [[Ratio analysis]] | |||
Revision as of 14:20, 23 October 2012
(PER). The ratio of the equity value of a company to its accounting earnings (profit after tax). The PER can be calculated either on a per-share basis or on the total equity value and total earnings, giving identical results.
Per share: PER = Current share price ÷ Earnings per share. On total values: PER = Total equity value ÷ Total earnings.
For example if Company A's total equity value is $630m and its relevant earnings are $63m, the PER = $630m/$63m = 10. In another case if comparable PERs for an unlisted Company B are 12, and its relevant earnings are $10m, the total value of Company B's equity can be estimated on this basis as 12 x $10m = $120m.
Sometimes written as P/E ratio or PE ratio.
Also known as price earnings ratio.
See also
- Bootstrap effect
- Earnings multiples
- Earnings per share
- Earnings yield
- Historic
- Multiples valuation
- Prospective
- Ratio analysis
