# What is the PE Ratio in the Stock Market (P/E Ratio Kya Hai In Hindi)

P/E Ratio Kya Hota Hai In Hindi: Hello friends welcome to another new article of our blog Techsole in which we will tell you What is P/E Ratio, Types of P/E Ratio, How to Calculate P/E Ratio And Uses of P/E Ratio To give information about.

P/E Ratio Share Market It is a very important metrics used in the market, with the help of which investors can find out which stock has high current market price and which is low. P/E Ratio is important for investors in making investment decisions.

So let’s start – What is PE Ratio? ## What is P/E Ratio

P/E Ratio is a popular financial ratio, it means Price-to-Earnings Ratio. P/E Ratio is a ratio used for valuing companies which tells that the company’s share In comparison to its EPS (Earnings Per Share), the stock is trading at how many times the price.

Simply put, the P/E Ratio is the ratio of a company’s share price to its Earnings Per Share (EPS). The P/E Ratio indicates whether a stock is expensive or cheap at its current market price. The P/E ratio is sometimes also known as price multiple or earnings multiple.

The P / E Ratio of each company can be different, the company whose P / E Ratio is higher means that its share price is valuable. The P/E Ratio should always be compared with the companies of the same sector.

## Example of P/E Ratio

Let us understand P/E Ratio with an example,

For example, suppose the P/E Ratio of a company A is 15 and on the other hand another company B of the same sector has a P/E Ratio of 20, then it means that the share price of A company is less than that of B.

When the share price rises much faster than earnings growth, the P/E ratio becomes high. If the share price falls much faster than earnings, the P/E ratio is reduced. A high P/E ratio means a stock is expensive and may fall in price in the future, and a low P/E ratio means a stock is priced low and may rise in future.

P/E Ratio is very important in making investment decisions, but here we are not giving you investment advice because investing in a company is not done just by looking at P/E Ratio, there are many factors to consider for investment. are there.

## How to calculate P/E Ratio?

Following is the formula to calculate P/E Ratio –

• P/E Ratio = (Market Price Per Share / Earning Per Share)

For example, suppose the market price of a company in the IT sector is Rs 150 and its EPS is Rs 10, then the P/E Ratio of that company will be (150/10) = 15. Now to find out whether P/E Ratio is high or low then you have to compare P/E Ratio with other company in IT sector.

To calculate the P/E Ratio, you can get the current market share price of the company from any financial website, you will get it very easily. Earning Per Share is a bit vague figure, EPS comes in two varieties one is “trailing 12 months” i.e. performance of the company in last 12 months and second EPS can be obtained while releasing the earnings of the company.

## Types of P/E Ratio

Depending on the nature of income of the company, there are mainly two types of P/E Ratio – Forward P/E Ratio and Trailing P/E Ratio. Let us now understand both of these very well.

### #1 – Forward Price-to-Earning

Forward P/E Ratio is calculated on the basis of future earnings of the company. This is sometimes also known as estimated price to earnings. Forward P/E is calculated by dividing the company’s expected future earnings by the current market price of the company’s stock.

Forward P/E is useful for comparing a company’s current earnings to future earnings, but this P/E is not very reliable because many outside analysts also make estimates, which can lead to discrepancies in figures.

### #2 – Trailing Price-to-Earnings

Trailing P/E is calculated on the basis of the earnings of the company for the last 12 months. To calculate Trailing P/E, the current market price of a company’s stock is divided by the company’s earnings for the last 12 months. This is the most reliable P/E ratio, as there is no guesswork involved. In this P/E Ratio, the company has given the correct report of its income.

## Uses of P/E Ratio

The P/E ratio is used by many investors and analysts. With the help of P/E Ratio, investors are able to find out which company’s share price is high and whose share price is low. Investors are able to compare the current share price of two companies in the same sector through the P/E ratio.

Following are some of the major uses of P/E Ratio –

• In determining the stock price of the company by the investors.
• In assessing the competitiveness of a company.

## How much P/E Ratio should I invest in stocks?

Many people think that stocks with high P/E ratio are expensive and stocks with low P/E ratio are cheap. Therefore, one should invest in a stock with a low P / E Ratio, but it is not so, if this is the case, then the investor of a stock with a low P / E Ratio becomes rich.

A high P/E Ratio indicates that the current market price of a company’s stock is higher than its EPS and a low P/E Ratio indicates that the current market price of a company’s stock is less than its EPS.

But when it comes to investing, you have to test the company on many parameters and then go and invest in the company. If you think that a company will do well in future even if its P/E Ratio is high, then you should invest in it.