What is a P/E Ratio? | Price to Earning Ratio Explained
Price to earnings ratio, also known as PE ratio, is the most commonly used valuation parameter to evaluate stock price in the market.
It is calculated as – Price Per Share / Earnings Per Share. It denotes the number of times the market is willing to pay to the company’s earnings.
As a valuation parameter, a low PE stock is interpreted as an undervalued stock, while a high PE stock is interpreted as a richly valued stock.
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