The P/E ratio shows how long it takes to recover the money invested. Photo: Shutterstock
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As an investor, you may have noticed that people talk about the abbreviation P/E, which theoretically should play a role in investment success. We analyze the concept, which creates confusion for novice investors, and explain why it is important to apply it in the analysis of stocks, on the basis of which investment decisions are made.
P/E maybe price-earnings ratio is a ratio by which an investor can calculate whether a company’s shares are overvalued or undervalued.
P/E or market price-earnings ratio
It shows the relationship between the market price of the company’s shares and the net profit per share, i.e. how many euros must be invested to earn 1 euro per year. It is generally used to provide a more general and quick assessment of whether a company’s shares are fairly valued in the market. It can be calculated using net profit for the last 12 months as well as profit from a longer/shorter period, depending on the analyst’s objective.
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2024-01-17 14:34:00
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