PRICE EARNING RATIO (P/E).

Earnings per share alone mean absolutely nothing. In order decide it is expensive or cheap stock to buy we should take into consideration the price at which the stock is bought.you have to look at those earnings relative to the stock price. Investors employ the price/earnings (P/E) ratio to get this comparison. The P/E ratio takes the stock price and divides it by the last financial year earnings. If XYZ is currently trading at Rs 150 a share with RS 10. of earnings per share (EPS), it would have a P/E of 15.

PRICE EARNING RATIO = SHARE PRICE / EARNING PER SHARE.