Conversion Solutions Holdings (fka CSHD)

[drypowder111]

P/E Ratio

The most widely used tool to value a stock is its price-to-earnings ratio, or PE ratio. PE ratio is calculated by dividing the price of the stock by its earnings-per share. Earnings-per-share is computed by dividing a company’s net income (profits after taxes) by the number of shares outstanding. The reason that a PE ratio is so important is because it is an accurate measure to compare stocks within an industry. If the industry average for a PE ratio is 25 and a company within that industry has a PE ratio of 15 with strong financial performance, Wall Street analysts may take notice and value that stock at a higher price because it is considered cheaper relative to its competitors. If a stock is considered just as strong (if not stronger) than other companies who make similar products but is at a cheaper price, shouldn’t its stock price increase to adjust this? Makes sense.