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Price / earnings ratio (P / E) - key figures simply explained

The price / earnings ratio describes the relationship between the current share price and the annual earnings per share.
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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.

Calculation

Price earnings ratio = price of shares / earnings per share

Rating

+1 point: current PER <12
0 points: current PER between 12 and 16
-1 point: current PER> 16 or <0

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