Is a company with a low P/E, all other things being equal, a growing company or a mature company? Justify the answer please
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The P/E ratio is calculated as a stock’s current share price divided by its earnings per share for a 12-month period.
A stock trading at $40 per share with an EPS of $2 has a P/E ratio of 20, while a stock trading at $40 per share with an EPS of $1 has a P/E ratio of 40, meaning the investor pays $40 to claim $1 in earnings.
P/E ratios tend to vary from industry to industry, so it is important to compare companies from the same industry and with similar characteristics.
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