Price Earnings Ratio

Introduction

The price-earnings ratio (P/E ratio) is the ratio of a company's share price to the company's earnings per share. The P/E ratio is a measure to know how expensive the stock is when compared to scrips within the same industry or with the industry. Index P/E can be used as an effective comparison benchmark.

Formula: Index market capitalization / Gross earnings

where

Index market capitalization of the Index constituents is the sum total of the outstanding equity shares or units considered for index computation multiplied by the last traded price of each index constituent adjusted for factors such as free-float, capping factor etc. depending upon the index methodology; and

The earnings (including profits and losses) reported by each index constituent in trailing 4 quarters (standalone financials) are cumulated and adjusted for factors such as free-float, capping factor etc. depending upon the index methodology to arrive at the gross earnings.