## Wednesday 2 January 2019

A Price to Earnings Ratio or commonly abbreviated by the acronym PER (p/e Ratio) is the ratio of market price per share against profit net per share. The ratio of Price to Earnings ratio this is the valuations the price per share of the company at this time compared to the earnings per share. Price to Earnings Ratio this is the ratio is often used to evaluate prospective investments.

This ratio is also used to assist investors in making decision whether to buy shares of a particular company. Generally, traders or investors will take into account the PER or p/e Ratio to estimate market value on a stock.

## The formula PER (Price to Earnings Ratio or price ratio against revenues)

Price to Earnings Ratio (P/E Ratio) is calculated by means of share "market value per share (Market Value per Share) of" with "Earnings per shares (Earning per Share/EPS)". Market Value per share data can be taken from the stock market or stock exchange, while Earning per Share can be calculated by way of share your background Clean against the number of outstanding shares on the market.

The following are PER or price ratio against income:

Price to Earnings Ratio (PER) = stock price/Earnings per share

Note:

• Prices against Incomes in the United Kingdom called the language with a Price to Earnings Ratio (PER).

• The price of shares in the language of the United Kingdom often referred to with the Market Price per Share.

• Earnings per share in the language of the United Kingdom called the Earnings per Share (EPS).

By calculating p/e Ratio or Price Earnings Ratio, we can figure out how big the price paid by the market want to against the income or profits of an enterprise.

Ratio PER his higher indicates that the market is willing to pay more towards the income or profits of an enterprise, and has high expectations towards the future of the company was so willing to appreciate it at higher. On the other hand, the ratio of Income Against Price (Price Earnings ratio) lower indicating that the market does not have enough confidence in the future against the shares of the company in question.

The average p/e Ratio or PER a stock is usually 12 to 15, but those values depending on market and economic conditions. Assessment Ratio PER also varies depending on the industry that was run. Every industry has a different assessment against the p/e Ratio.

### Examples of calculations PER (Price to Earnings Ratio or price ratio against revenues)

For example, if the price per sheet of company stock A is \$ 500. By a ratio of EPS of \$. 20. Then the p/e Ratio is \$ 500/\$ 20 = \$ 25. This indicates that investors are willing to pay \$ 25. For each \$ 1 the company's revenue. For companies that suffered losses or income is negative, the p/e ratio is usually express with "no" or normally written with "n/a" or "Not Applicable".

### Valuation PER (Price to Earnings Ratio or price ratio against revenues)

Price ratio against revenue (Price Earnings Ratio) high may not necessarily be a positive indicator. Because a high ratio PER could be cause by the "overpricing" on the stock. On the other hand, Price Earnings Ratio is not necessarily a low negative indicator. It could be the stock is being ignore by the market or have not been active trad able.

Therefore, the Price Earnings Ratio should be use with caution. Investment decisions should not be base only on the ratio P/E’s; investors should consider. The ratio-the ratio of the other to take the decision whether to buy or not to buy certain stocks.

The most frequently discuss issues about the p/e ratio this is the calculation of denominators. That also incorporate the stuff non cash revenues figures can be manipulate. So easily, for example by pasting a depreciation or amortization.

Although it is not manipulate by deliberately, figure income still can also be influence by the non-cash items. Therefore, most investors use "Price to Cash Flow Ratio" or "price ratio against Cash flow" for the calculation. Which eliminates the non-cash items and only pay attention to Cash or money its cash only.