Prajna Capital - An Investment Guide

Earning ( P/E ) is one of the most widely term used in the share market. Every investor now a day supposed to know the term P/E. If the term is so important then what exactly it mean? The meaning of the term is in its name itself. It is ratio of Price to its Earning. In other words, it is the equilibrium of what market expects and how company has performed? Confused? What is price of the stock? How the price of the stock is determined? 1) Stock Price: It is just the demand-supply concept. Price of any stock is determined on the basis of demand of that script and its supply in the market so in short it can be considered as the expectations of the investor from the script. 2) Earnings : Earnings mean earnings after depreciation and tax. In calculating P/E, earnings are considered per share to bring uniformity in calculation. So EPS is the actual performance of the company, which is calculated as follows- EPS = Profit after Tax( Profit for Shareholders) Number of shares outstanding. Sin...