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Calculating Price/Earnings Ratio (P/E)

Action List Bloomsbury

Purpose and benefits

The price/earnings ratio (P/E) is simply the share price divided by earnings per share (EPS). While EPS is an actual amount of money, usually expressed in pence per share, the P/E ratio has no units, it is just a number. Thus if a quoted company has a share price of £100 and EPS of £12 for the last published year, then it has a historical P/E of 8.3. If analysts are forecasting for the next year EPS of, say, £14 then the forecast P/E is 7.1.

Audience

For managers at all levels

Learning method

Management checklist, answers to FAQs, common traps, and suggested action plans.

Time to Complete

10 mins

Length

2 Pages

Participants

1

Price

£2 Pounds Sterling
(inc. VAT)

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