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Find the trailing, leading and justified P/E values for a share of Ms. T, Ltd. when:
The price-earnings ratio compares the price of an equity to its earnings. The ratio is calculated as a company's share price divided by its earnings per share. The P/E compares what an investor has to pay for a share to its return in investment (earnings). Analysts and investors use the ratio to decide whether the share price of a company is fairly valued, undervalued or overvalued. Investors can analyze the market's stock valuation of a company and its shares relative to its income.
Stocks with higher or more certain forecast earnings growth will usually have higher P/E values. This is a positive indicator for growth-oriented investors. Stocks expected to have lower or riskier earnings growth will usually have a lower P/E value.
Investors can use the P/E ratio to compare the value of stocks: if one stock has a P/E twice that of another stock, it is viewed as a less attractive investment. However, P/E comparisons of stocks in different industries or measured for different time periods might be misleading. In general, P/E ratios are most useful to compare the earnings of peer companies in a similar business sector or industry.
P/E Ratio = Current share price ÷ earnings per share