PE Ratio

In Finance, the PE ratio of a stock (also called its "multiple", or P/E) is calculated as:

The price per share (numerator) is the market price of a single share of the stock. The Earnings per share (denominator) is the preferred shares. The appropriate calculation for preferreds is the preferred dividend coverage ratio.

A related concept is the PEG ratio. This is the PE ratio adjusted by a growth coefficient. It is sometimes used in high growth industries and new ventures. Its use is controversial.

Another practice, neither mainstream, based on behavioral finance, is to take market behavior parameters, among which the stock image, as factors playing a part in the level and evolution of the PE.

See also

• fundamental analysis
• P/E
• Stock valuation
• list of finance topics