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How is the P/E ratio calculated?

The formula for P/E is the market value per share / Earnings per share. It is calculated by just dividing the current market price by the EPS. For example, suppose a company generates an income of 1 crore and has 20 lakh shares outstanding on the market, so the EPS would come to around Rs 5. Now if the stock price is around Rs 120, its PE ratio will be 120 divided by 5, coming down to 24. Hence, the PE multiple of the stock is 24.

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What is the Price-to-Earnings (P/E) ratio? What is Earnings Per Share (EPS)?

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