Finance Junkie
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Postby chandniwadhwani92 » Wed Feb 04, 2015 6:12 pm

Price Earnings Ratio Formula
As you can see, the Island's ratio is 10 times. This means that investors are willing to pay 10 dollars for every dollar of earnings. In other words, this stock is trading at a multiple of ten.
my question
When investor is earning one dollar how he is raedy to pay 10 dollar for it dis woul be loss for him

ca u interepret price earning ratios

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Postby edupristine » Thu Feb 05, 2015 6:47 am

Hi, price earnings ratio is widely used ratio which helps investors decide if they should purchase the shares of a particular company. or we can also say that price earnings ratio tells us how much market is willing to pay for the company's earnings. if price earnings ratio is high it tells that market has high hopes from the company and it has high future prospects therefore they are willing to pay higher for that company. otherwise, if P/E ratio is lower then it indicates that market does not have confidence in future of the company.

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