What is the P/E ratio?

P/E ratio or Price Earning Ratio literally means “Price to Earnings Ratio”. In practical terms, it can be called a “Profit Multiplier”.

Generally, the ratio of the current price of a share to earnings per share (EPS) is called PE ratio. One of the main and popular tools for assessing the risk of a company's shares is the PE ratio. PE is calculated by dividing “Current Price per Share” by “EPS”. For example: If the current price of a share is Rs.100 and the EPS of the share in the last 12 months is Rs.5, then the PE ratio of that share will be: 100 ÷ 5 = 20

If a stock is overpriced or underpriced, it should be compared with other stocks in its sector or industry group. Sectors are made up of industry groups, and industry groups are made up of stocks with similar businesses, such as banking or financial services.

নিচে একটি ভিডিও দেয়া হয়েছে