| P/E
Ratio = Market Value per Share (share price) / Earnings per
Share (EPS)
The ratio of a company’s share price to its per-share
earnings. You calculate P/E by taking the current stock price
and dividing by its earnings per share (EPS). Note: Earnings
per share can be found in the company’s financial statements.
Usually
P/E is calculated using the EPS from the last four quarters,
also know as trailing P/E. Many times however, EPS comes from
projected earnings over the next four quarters when calculating
for penny stock companies. Referred to as projected P/E.
The
problem that must be addressed when dealing with penny stocks
is that P/E usually is not calculated for pink sheet companies
that do not report earnings and/or OTCBB companies that are
not profitable. If a penny stock does have a P/E, make sure
the company has a reliable earnings history to base the calculations.
Be aware of short-term profitability that can make a company
appear stronger than it really is.
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