Forum Archive Index - December 1999

[Michael Sprott <MSPROTT@clear.co.nz>]

Hi Paul

The PER or price earnings ratio is calculated by dividing the current market
price by the companies earnings per share. Earnings per share can be
calculated a number of ways but is usually the net profit after tax divided
by the average number of shares on issue.

The PER is a useful indicator of the value of a company asit shows the
amount of time (in years) for an investor to cover the purchase price of his
investment from net profits.

Last financial year end figures are used to calculate these ratios against
the current share price.

Cheers

> -----Original Message-----
> From: Paul Jackson [SMTP:j+pjackson@xtra.co.nz]
> Sent: Wednesday, December 15, 1999 9:22 AM
> To:   sharechat@sharechat.co.nz
> Subject:      [sharechat] Newbie Question
> 
> I am struggling to understand PE ratios. Please correct me if I'm wrong,
> my understanding is the ratio of the current share price to the forecasted
> earnings of the company. If so who does the forecast? The company? An
> analyst? What method is used to forecast this? Who checks the maths and
> logic in the forecast?
>  
> Your help in this would be appreciated
>  
> Paul

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