What Is Considered A Good Pe Ratio For A Stock How Does Earnings Per Share Work?

You are searching about What Is Considered A Good Pe Ratio For A Stock, today we will share with you article about What Is Considered A Good Pe Ratio For A Stock was compiled and edited by our team from many sources on the internet. Hope this article on the topic What Is Considered A Good Pe Ratio For A Stock is useful to you.

How Does Earnings Per Share Work?

Earnings Per Share, And Price/Earnings Ratio – Two Tools For Determining Stock Viability

There is far more to owning a stock than its share price, even if it’s the share price that gets all the coverage in the financial press. A share price only shows the price to buy the stock, or how much you can theoretically sell it for, but it does little to convey how much value is retained from holding the stock for the long term.

The key to determining long term value in a stock is it’s price/earnings ratio. Price/earnings is, in essence, the price of a share, divided by the earnings per share. Earnings per share is calculated by dividing the total profits (less operating expenses, and preferred stock dividends) by the number of outstanding shares in circulation.

When looking at price/earnings ratio, a handy rule of thumb is to try to calculate how many years of earnings would one share have to accumulate to match the price it was originally purchased at. In most companies, this results in a ratio ranging from 10 to 15, with a few undervalued stocks hitting 7 to 8 years. One of the hallmarks of the dot-com boom was the absurdly high price/earnings ratios – some shares of stock were selling at P/E ratios of 100 or more, during the ’90s.

One thing to be aware of is that there are multiple ways of calculating earnings per share; they all boil down to set asides of funds that are paid out before earnings are divided up between shares. If you have any questions about how earnings per share are calculated for a stock you hold, ask your broker for more information.

The key to earnings per share is that by holding a share of a company, you are, in theory, holding a piece of a corporation with a retained value, and you aren’t speculating on the price going up indefinitely. One method of maximizing a good PE ratio stock with a stable price is to invest in a dividend purchasing plan – in essence, you’re telling the company to reinvest your dividends into new shares of the stock.

Video about What Is Considered A Good Pe Ratio For A Stock

You can see more content about What Is Considered A Good Pe Ratio For A Stock on our youtube channel: Click Here

Question about What Is Considered A Good Pe Ratio For A Stock

If you have any questions about What Is Considered A Good Pe Ratio For A Stock, please let us know, all your questions or suggestions will help us improve in the following articles!

The article What Is Considered A Good Pe Ratio For A Stock was compiled by me and my team from many sources. If you find the article What Is Considered A Good Pe Ratio For A Stock helpful to you, please support the team Like or Share!

Rate Articles What Is Considered A Good Pe Ratio For A Stock

Rate: 4-5 stars
Ratings: 2059
Views: 18231267

Search keywords What Is Considered A Good Pe Ratio For A Stock

What Is Considered A Good Pe Ratio For A Stock
way What Is Considered A Good Pe Ratio For A Stock
tutorial What Is Considered A Good Pe Ratio For A Stock
What Is Considered A Good Pe Ratio For A Stock free
#Earnings #Share #Work

Source: https://ezinearticles.com/?How-Does-Earnings-Per-Share-Work?&id=744882

Related Posts

default-image-feature

What Is Considered A Big Drop In The Stock Market Stock Market Trading Strategy – Easy Stock Market Trading Strategy For the Common Investor

You are searching about What Is Considered A Big Drop In The Stock Market, today we will share with you article about What Is Considered A Big…

default-image-feature

What Is Common Stock Classified As On A Balance Sheet Keep Track of Your Total Net Worth

You are searching about What Is Common Stock Classified As On A Balance Sheet, today we will share with you article about What Is Common Stock Classified…

default-image-feature

What Is Causing The Drop In The Stock Market Today The Real Money Forex Robot – Discover the Wonder of Forex Robot

You are searching about What Is Causing The Drop In The Stock Market Today, today we will share with you article about What Is Causing The Drop…

default-image-feature

What Is Call And Put In Stock Market With Example How to Make Money Trading Binary Options – Earn Money Fast

You are searching about What Is Call And Put In Stock Market With Example, today we will share with you article about What Is Call And Put…

default-image-feature

What Is Buy Price And Sell Price In Stock Market Learn Foreign Exchange Trading – Forex Trading the Easy Way

You are searching about What Is Buy Price And Sell Price In Stock Market, today we will share with you article about What Is Buy Price And…

default-image-feature

What Is Bid Price And Ask Price In Stock Market Forex Trading – What Is Market Spread in Forex?

You are searching about What Is Bid Price And Ask Price In Stock Market, today we will share with you article about What Is Bid Price And…