Results for “Price-to-Earnings Ratio”
7 terms
Price-to-Earnings Ratio
Fundamental Analysis & Valuation
ratio (x, times)
The price of one share divided by the earnings attributable to it, showing how many rupees are paid per rupee of annual profit.
P/E = Market Price per Share / Earnings per Share
Earnings Yield
Fundamental Analysis & Valuation
%
Earnings per share expressed as a percentage of the share price — the inverse of the price-to-earnings ratio.
Earnings Yield = Earnings per Share / Market Price per Share x 100 = 1 / P/E x 100
Forward Price-to-Earnings
Fundamental Analysis & Valuation
ratio (x, times)
The price-to-earnings ratio computed using forecast earnings for a future period rather than reported ones.
Forward P/E = Current Market Price / Estimated Earnings per Share for the Forecast Period
PEG Ratio
Fundamental Analysis & Valuation
ratio (x, times)
The price-to-earnings ratio divided by the expected annual earnings growth rate, used to judge whether growth justifies the multiple.
PEG = Price-to-Earnings Ratio / Expected Annual Earnings Growth Rate (in percent)
Trailing Price-to-Earnings
Fundamental Analysis & Valuation
ratio (x, times)
The price-to-earnings ratio computed using earnings actually reported over the last twelve months.
Trailing P/E = Current Market Price / Earnings per Share over the Trailing Twelve Months
Commodity Cycle
Economy, Macro & Market Cycles
qualitative
The long swing in commodity prices driven by the lag between demand changes and the supply response.
Test: high prices induce investment in new supply, which arrives years later and depresses prices, discouraging investment in turn
Cyclical Stock
Market Basics & Instruments
qualitative
A share whose earnings rise and fall with the economic cycle, typically in sectors such as metals, cement, autos and construction.
Test: earnings correlate strongly with GDP growth, commodity prices or credit conditions, with wide peak-to-trough swings