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What is P/E ratio?

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In terms of an IPO, P/E is the issue price divided by the most recent Earning Per Share EPS. This ratio tells you if the issue is under-priced or over-priced vis-à-vis the industry P/E. All other things being equal, if the P/E of the company is less than the industry P/E then the issue is under-priced. If the P/E of the company is higher, then the issue is over-priced.
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2 Comments

2. S P Aghera  Feb 8, 2008 7:03:30 PM I Like It. | Report Abuse Reply
Sometimes P/E ratio will confuse to judge real performance of any company. Example: If company X have share price is Rs 1000 and EPS is Rs 10 then P/E = 100. But if Share price is Rs 1000 and performance of company is very good and very good Net profit and EPS is Rs 20, then P/E = 50. Them what to judge about this company?
1. Neeraj  Feb 8, 2008 2:12:39 PM I Like It. | Report Abuse Reply
How to calculate Industry P/E or from where can we get this value?