What Is a P/E 30 Ratio?
A P/E ratio of 30 means that a company's stock price is trading at 30 times the company's earnings per share. The P/E ratio (price-to-earnings ratio) is the valuation ratio of a company's market value per share divided by a company's earnings per share (EPS).
At the most basic level, a P/E ratio identifies for one dollar of earnings what investors are willing to pay for one unit of stock. For instance, a business said to be trading at a P/E ratio of 30:1 would indicate investors are willing to pay $30 in market price for every $1 in earnings. As a relative value indicator, investors can get a sense of which securities are trading (or priced) richly relative to other businesses that may offer a better bargain for the same level of risk.
P/E 30 Ratio Explained
A P/E of 30 is high by historical stock market standards. This type of valuation is usually placed on only the fastest-growing companies by investors in the company's early stages of growth. Once a company becomes more mature, it will grow more slowly and the P/E tends to decline.
In financial circles, the P/E ratio is often a hot topic, with analyst and market prognosticators opining on market trends and whether P/E ratios are higher or lower than historical norms. Although the measure still enjoys a fair amount of attention, insiders know it can be gamed. As such, a number of extensions and alternative metrics have grown in importance. The digitization of companies and markets further complicates traditional interpretations of the ratio.
Understanding the P/E Ratio
Investors often want to compare how the share price of one company compares to that of another. But just looking at the stock price is like comparing apples to oranges since companies have different numbers of shares outstanding, and even if they had the same share float, companies operate in different industry segments or are at different stages in the corporate life cycle. Fortunately, financial analysts have developed a number of tools for such purposes of comparison. The price-to-earnings ratio, or P/E, is one of the most widely used metrics.
FAQs
What Is a P/E 30 Ratio? A P/E ratio of 30 means that a company's stock price is trading at 30 times the company's earnings per share. The P/E ratio (price-to-earnings ratio) is the valuation ratio of a company's market value per share divided by a company's earnings per share (EPS).
How to calculate PE ratio with example? ›
P/E Ratio is calculated by dividing the market price of a share by the earnings per share. For instance, the market price of a share of the Company ABC is Rs 90 and the earnings per share are Rs 9 . P/E = 90 / 9 = 10.
How do you explain the PE ratio? ›
The P/E ratio is calculated by dividing the market value price per share by the company's earnings per share (EPS). A high P/E ratio can mean that a stock's price is high relative to earnings and possibly overvalued. A low P/E ratio might indicate that the current stock price is low relative to earnings.
What is considered a bad PE ratio? ›
Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.
What PE ratio is good to buy? ›
As far as Nifty is concerned, it has traded in a PE range of 10 to 30 historically. Average PE of Nifty in the last 20 years was around 20.* So PEs below 20 may provide good investment opportunities; lower the PE below 20, more attractive the investment potential.
What does AP-E ratio of 30 mean? ›
A P/E ratio of 30 means that a company's stock price is trading at 30 times the company's earnings per share. The P/E ratio (price-to-earnings ratio) is the valuation ratio of a company's market value per share divided by a company's earnings per share (EPS).
What is the correct formula for PE? ›
Mathematically, the P/E calculation is relatively straightforward. To determine the P/E ratio, one simply takes the price per share of the stock and divides it by the earnings per share (EPS) of the stock. The calculation is therefore: P/E Ratio = Price per share/Earnings per share.
What is a healthy PE ratio range? ›
What Is Considered to Be a Good PEG Ratio? In general, a good PEG ratio has a value lower than 1.0. PEG ratios greater than 1.0 are generally considered unfavorable, suggesting a stock is overvalued. Meanwhile, PEG ratios lower than 1.0 are considered better, indicating a stock is relatively undervalued.
What is the PE ratio in layman's terms? ›
Key Takeaways. The price-to-earnings (P/E) ratio is the proportion of a company's share price to its earnings per share. A high P/E ratio could mean that a company's stock is overvalued or that investors expect high growth rates.
Should I buy a stock with a negative PE ratio? ›
A high P/E ratio typically means a stock's price is high relative to earnings. A low P/E ratio indicates that a stock's price is low compared to earnings and that the company may be losing money. A consistently negative P/E ratio runs the risk of bankruptcy for the company.
PE Ratio Related Metrics
| PS Ratio | 8.295 |
|---|
| Earnings Yield | 1.57% |
| Market Cap | 724.00B |
| PEGY Ratio | 74.91 |
| Operating PE Ratio | 109.42 |
5 more rowsP/E ratio as of September 2024 (TTM): 32.8
According to Apple's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 32.8118. At the end of 2023 the company had a P/E ratio of 29.8.
What is the PE ratio of Best Buy? ›
As of today (2024-09-10), Best Buy Co's share price is $96.37. Best Buy Co's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Jul. 2024 was $5.80. Therefore, Best Buy Co's PE Ratio (TTM) for today is 16.62.
What is PE formula examples? ›
Example: This 2 kg hammer is 0.4 m up. What is it's PE?
- PE = m g h.
- = 2 kg × 9.8 m/s2 × 0.4 m.
- = 7.84 kg m2/s2
- = 7.84 J.
Price to earnings calculator
A price-to-earnings (P/E) ratio is a financial metric used to evaluate the relative value of a company's stock. It is calculated by dividing the market price per share of a company's stock by its earnings per share (EPS).
What is the formula for earnings per share ratio? ›
Earnings per share (EPS) is a measure of a company's profitability that indicates how much profit each outstanding share of common stock has earned. It's calculated by dividing the company's net income by the total number of outstanding shares.
How do you calculate the PE ratio for the last 5 years? ›
A stock's average price to earnings ratio over the trailing five-year period. It is calculated by adding the P/E ratios of the company for each fiscal year for the past five fiscal years, then dividing the sum by five.
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