Question

A stock has a price/earnings ratio (p/e) of 4.5. earnings per share (eps) of these stocks is 8. what is the stockâ€™s market value?

1. The stocks market value is 36 per share.

### What is P/E Ratio of a Company?

A price-to-earnings ratio (P/E) would be a popular metric used by investors and analysts to estimate the value of a business.
Some key features of the P/E Ratio of a Company are-
• The P/E ratio can help you determine if a stock has been overvalued and undervalued.
• A company’s P/E ratio can also be compared to other stocks within the same market or the S&amp;P 500 Index.
• The P/E ratio compares the value of the stock to the earnings of the firm.
• The P/E ratio represents whatever the market is ready to pay for a stock now based on previous or projected earnings.
• The current market price of the stock is represented by the letter “P” in the P/E ratio.
• Stock prices are determined by market supply and demand.
Calculation for the market share values of the stock;
A stock has a price/earnings ratio (p/e) of 4.5.
The earning per stock is 8.
P/E ratio = price per share/Earning per share
Price per share = (P/E ratio)×(Earning per share)
Price per share = 4.5 × 8
Price per share = 36
Therefore, the price of the stock’s market value is 36 per share.
To know more about the P/E ratio, here
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