Price Earnings Ratio (PE ratio)PE ratio, the most widely used investment measure, is calculated as the previous day's closing share price divided by the earnings per share-basic (EPS-basic). PE ratio is used to appraise a company's profit performance. Where a company's prospects are considered by the stock market to be good, then it is likely that the company's share price will rise, producing a higher PE ratio.
The calculation is as follows:
= share price / EPS-basic