(Source: BloombergQuint)

BQLearning: What Is PE Ratio?

BQLearning is a show that seeks to demystify financial markets, economic theories, legal processes and political structures. This series focuses on financial market jargon.

PE ratio or the price-to-earnings ratio is one of the most important parameters used to assess if a stock is undervalued or overvalued. It is also an indication of how much an investor is willing to pay for a company’s earnings. Price -to-earnings ratio is calculated by diving the stock price of the company with its earnings per share.

Anupam Gupta, independent consultant at Aavan Research, explains the significance of PE ratio, and why it’s such an important tool to value companies in the same sector over a period of time.

Also read: BQLearning: What Is EPS?