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Calculate P/E ratio
In this post you can not only easily calculate the price to profit ratio, but also learn the Classification of the KGV.
Because even though the price/earnings ratio formula provides an important metric, you should use the KGV Meaning be able to classify correctly. Depending on the industry and type of company, the P/E ratio formula is more or less helpful.
In this article you will learn everything you need to know about the use and estimation of the P/E ratio. So you can quickly evaluate and assess shares.
P/E = share price / earnings per share
To calculate the price-earnings ratio, you only need two pieces of information:
Example:
KGV = CHF 3'000 / CHF 250 = 12
The price/earnings ratio indicates the multiple at which a company is traded on the stock exchange in relation to its annual earnings per share.
You can also think of the ratio as the number of years it will take for your investment to be earned by the company, assuming no change in profits.
Example:
A P/E ratio of 12 means that it would take 12 years for an investment to be recouped by the company at the current price.
P/E ratio to be used sensibly: The P/E ratio is not equally useful for all companies. Therefore, ideally use it per company and look at where the P/E ratio of share XY currently is. Is it high or is the share currently cheap in historical comparison?
Attention: The price/earnings ratio should be viewed with a certain distance. Profits cannot simply be extrapolated into the future. Also one-time, extraordinary earnings can strongly distort the P/E ratio. So keep in mind that the P/E ratio alone cannot be seen as an argument for an investment.
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The P/E ratio calculation is very simple thanks to our price-earnings ratio calculator. However, the classification of the ratio should be considered with understanding. The P/E ratio is one of the most important Key financial figures in business valuation, yet it is not always useful.
At Growth company or entire markets, for example, other ratios are usually more meaningful. Thanks to our optimizations, the P/E ratio can nevertheless remain meaningful and be adjusted.
Just keep in mind that the P/E ratio cannot be seen alone as an argument for buying a stock.
Were you aware of this distant classification of KGV? Feel free to leave us a comment and share, which key figure you use frequently.