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 close 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 (consolidated 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. In case, consolidated financials are not available, standalone financials for trailing 4 quarters will be considered.
Updated on: 05/04/2021
