Price to Earnings Ratio | PE Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.


Calculated as:


= marlet value per share / Earning per share(EPS)

For example, if a company is currently trading at Rs.450.00 a share and earnings over the last 12 months were RS 25.00 per share, the P/E ratio for the stock would be 18(Rs 450/Rs 25)

Price-To-Book Ratio - P/B Ratio

Also known as the "price-equity ratio".

Debt/Equity Ratio, Bonus Issue, Stock split.
A measure of a company's financial leverage calculated by dividing long-term debt by stockholder equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Bonus Issue
An offer of free additional shares to existing shareholders. A company may decide to distribute further shares as an alternative to increasing the dividend payout. Also known as a "scrip issue" or "capitalization issue".

New shares are issued to shareholders in proportion to their holdings. For example, the company may give one bonus share for every five shares held.

Stock split

The dividing of a company's existing stock into multiple shares. In a 2-for-1 split, each stockholder receives an additional share for each share he or she holds.

In the U.K., a stock split is referred to as a "scrip issue", "bonus issue", "capitalization issue" or "free issue".

This is usually a good indicator that a company's share price is doing well. However, a stock split doesn't give you any more value, just twice as many shares.

The dividing of a company's existing stock into multiple shares. In a 2-for-1 split, each stockholder receives an additional share for each share he or she holds.

Dividend Yield

Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:


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Price Earning to Growth-PEG

PEG is a widely used indicator of a stock's potential value. It is favored by many over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued.

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.





Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken.

E P S-Earning Per Share

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.



Calculated as:

= (Net income-Dividend on preferred stock) / (Average outstanding share)



In the EPS calculation, it is more accurate to use a weighted-average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.

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EPS = Net Earnings / Outstanding Shares

Using our example above, Company A had earnings of Rs.100 and 10 shares outstanding, which equals an EPS of 10 (Rs100 / 10 = 10). Company B had earnings of Rs.100 and 50 shares outstanding, which equals an EPS of 2 (Rs.100 / 50 = 2).

So, you should go buy Company A with an EPS of 10, right? Maybe, but not just on the basis of its EPS. The EPS is helpful in comparing one company to another, assuming they are in the same industry, but it doesn’t tell you whether it’s a good stock to buy or what the market thinks of it. For that information, we need to look at some ratios.

Before we move on, you should note that there are three types of EPS numbers:
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Trailing EPS

– last year’s numbers and the only actual EPS

Current EPS

– this year’s numbers, which are still projections

Forward EPS

– future numbers, which are obviously projections

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E P S

EPS abbriviation is Earning Per Share