P/E ratio
Also called: price to earnings ratio, price-earnings ratio, PE
The price-to-earnings ratio, the share price divided by earnings per share, showing how much investors pay for each rupee of yearly profit.
P/E = share price ÷ earnings per share, or equivalently market capitalisation ÷ net profit. A P/E of 25 means investors are paying ₹25 for every ₹1 of the company's yearly earnings.
A high P/E usually reflects expectations of growth or reliability; a low P/E can mean good value or real problems. It is meaningless when earnings are zero or negative, can be distorted by one-off items, and ignores debt.
Example
A company earning ₹30 per share whose shares trade at ₹600 has a P/E of 20.
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