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An Inquiry into the Application of the Price to Earning Ratio Evaluation Model in Investment Analysis

Zhou Xing-jie

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Abstract

Price to earnings ratio=Market value per share of common / Earnings of per share. This model is used to measure if the stock price is reasonable and to verify the investment value of the stock market. Using the price to earnings ratio, the investor can roughly analyze and evaluate the value of the stock and the investment risk. However, the price to earnings ratio has its own shortcomings. The investor, thus, should take other factors into account so as to make the best decision.

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What this paper is about

Price to earnings ratio=Market value per share of common / Earnings of per share. This model is used to measure if the stock price is reasonable and to verify the investment value of the stock market. Using the price to earnings ratio, the investor can roughly analyze and evaluate the value of the stock and the investment risk. However, the price to earnings ratio has its own shortcomings. The investor, thus, should take other factors into account so as to make the best decision.

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Available abstract

Price to earnings ratio=Market value per share of common / Earnings of per share. This model is used to measure if the stock price is reasonable and to verify the investment value of the stock market. Using the price to earnings ratio, the investor can roughly analyze and evaluate the value of the stock and the investment risk. However, the price to earnings ratio has its own shortcomings. The investor, thus, should take other factors into account so as to make the best decision.

Key concepts: Price–earnings ratio, Earnings, Earnings yield, Economics, Econometrics, Stock (firearms), Earnings per share, Financial economics

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