What is P/E and EPS in stocks?


P/E ratio refers to price-earnings ratio which is used in valuation a company by measuring its current stock price to its per-share earnings. The price-earnings ratio specifies the amount an investor can expect to invest in a company in order to get the particular amount return of that company’s earnings. It is calculated using:

P/E ratio = Market Value per Share / Earnings per Share

It is very helpful in making a firm and proper plan for investors to invest taking a targeted profit amount as per the investment amount.

EPS refers to Earnings per share which is the share of a company's profit assigned to each unsettled share of common stock. It is an important financial measure, which indicates the profitability of a company. It is calculated by dividing the company's net income with its total number of outstanding shares.

EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares

It is considered to be the single most vital variable in determining a share's price. An investor can recognize the fair market value of a stock as what the market is ready to pay based on a company's current earning.

Hence, both P/E ratio and EPS are inter-related with each other. However, if you are planning to invest in the stock market then you can also take a help of a reputed advisory firm that provides the best MCX tips on the basis of technical and fundamental analysis of the market.

(Source: https://www.quora.com/What-is-P-E-and-EPS-in-stocks )




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