A Price-Earnings Ratio (P/E ratio)

A price-earnings ratio (P/E ratio) is even computed to help quantify this relationship. The P/E ratio is the current

price of the stock divided by the latest EPS figure. It enables investors to anticipate movements in the price of a

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stock based on their projections of earnings per share. If a company’s P/E ratio is twenty and is expected to remain

constant, then an increase in EPS of $1 should lead to a $20 rise in stock price.

As of July 8, 2009, the P/E ratio for Several Prominent Companies

The ongoing debate as to whether EPS and the P/E ratio are over emphasized as investing tools is a controversy

better left to upper-level finance courses. The fascination is certainly real regardless of whether the perceived

benefits are as great as many believe.