1. 180 Posts.
    The P/E ratio is the current stock price of a company divided by its earnings per share (EPS).
    Variations exist using trailing EPS, forward EPS, or an average of the two.
    Historically, the average P/E ratio in the market has been around 15-25.
    Theoretically, a stock's P/E tells us how much investors are willing to pay per dollar of earnings.
    A better interpretation of the P/E ratio is to see it as a reflection of the market's optimism concerning a firm's growth prospects.
    The P/E ratio is a much better indicator of a stock's value than the market price alone.
    In general, it's difficult to say whether a particular P/E is high or low without taking into account growth rates and the industry.
    Changes in accounting rules as well as differing EPS calculations can make analysis difficult.
    P/E ratios are generally lower during times of high inflation.
    There are many explanations as to why a company has a low P/E.
    Don't base any buy or sell decision on the multiple alone.
 
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