Price Earnings Ratio

The typical multiple or ratio used is the Price Earnings (PE) ratio which is the price per share divided by the earnings per share. This is a widely accepted method of valuing a business or valuing shares and valuation derived with PE ratios are considered to be a good estimate.

















Using a Price Earnings ratio provides an equity value and no adjustment for debt or cash is required as the earning used to calculate the value is after servicing any debt (after interest payments).
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