What is earnings?
Revenue income is a metric market with ordinary stock shares, which measures how many markets evaluate shares. This ratio is also known as the ratio of the price to earnings, or the ratio of P/E, achieved by the price of the price and the division of earnings on the share of the underlying company for a certain period of time. Investors can calculate earnings multiple based on previous earnings or estimate the ratio based on future projections. If earnings reports are accurate, this ratio may be particularly useful in measuring stocks in a similar industry against each other. The exact valuation of shares is the goal of investors everywhere, as they try to find out whether the stocks are either overpriced or undervalued to make the most of their investment dollars. The price of a certain stock may sometimes not reflect its real value, but instead it can be based on its potential in the future. On other occasions, the performance of the company does not have to completely Jibe, with how they raise it. Earnings is a way to use investors to use level CENES and earnings to calculate the market perspective on specific stocks.
As an example of a multiple of earnings, imagine that a certain stock has a current price of $ 60 USD (USD) per share. The basic company publishes a report on revenues that shows that the previous year's earnings were equivalent to $ 2 per share. To calculate the multiple, 60 USD is divided by $ 2, which brings a total of $ 30. Basically, this means that the investor pays $ 30 for every $ 1 out of earnings.
Many investors are trying to estimate a multiple of earnings using future projections of earnings from the company as a measuring stick. Because these projections cannot be verified with certainty, it is a bit of a risky trick, but it may be witty if the projections are almost accurate. The danger of confidence in P/E is that it eventually depends on the truth of the reports of earnings that can be manipulated with the company's accounting tricks.
Generally a company that has a high -end marketBy earning, the market considers much higher than it could indicate its earnings. It can be because the company has proven results or investors are betting on their potential. A low -ratio company can fly under the market radar. Determination of Benchmark P/E for a particular industry is a good way to measure one stock against others like this.