Definition of price / earnings ratio (P / E)
The P / E ratio describes the relationship between the current share price and the annual profit per share. It describes how many years it takes a company to generate the value of its shares as a profit.
Significance for the evaluation
The P / E ratio is an important key figure for assessing the earning power and development of a company compared to others. The lower the P / E ratio of a share, the cheaper the share appears. Low P / E stocks have historically generated higher returns.
Price earnings ratio = price of shares / earnings per share
+1 point: current PER <12
0 points: current PER between 12 and 16
-1 point: current PER> 16 or <0
Other interesting articles:
- Which stocks to buy? 12 key figures simply explained
- Return on equity - key figures simply explained
- Equity ratio - key figures simply explained
- Profit margin - key figures simply explained
- Price-earnings ratio (P / E) over 5 years - key figures simply explained