Knowledge Base

Which formula is used to calculate the price-to-earnings ratio (PER) of a stock?

Share price divided by number of outstanding shares

Market capitalization divided by net income

Share price divided by earnings per share (EPS)

Net income divided by number of outstanding shares

Which elements are needed to calculate earnings per share (EPS)?

Net income attributable to the group and number of outstanding shares

Market capitalization and share price

Gross profit and number of preferred shares

Total debt and number of outstanding shares

What is one of the risks associated with a high PER?

A certain undervaluation of the stock

Potential overvaluation if expectations are not met

A guaranteed net profit for the investor

A complete absence of risk for the investor

What are the limitations of the PER?

Inapplicability to loss-making companies (negative EPS)

Insensitivity to debt and cash position

Dependence on the accounting standards used

All of the above

The inverse of the PER (E/P) can be compared to bond yields.

True

False

The forward PER uses forecast earnings for the current or following fiscal year.

True

False

Categorize items by dragging them to the appropriate zones

Items to categorize:

Technology

Energy

Banking

Healthcare

Categories:

High PER sectors

Moderate PER sectors

Shiller PER (CAPE)

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