The ratio is used in valuing companies. The definitions may not be standardized. But the PER does not in itself indicate whether the share is a bargain. A company with a low PER indicates that the market perceives it as higher risk or lower growth or both as compared to a company with a higher PER.
If the investor feels that his perception is superior to that of the market, he can make the decision to buy or sell accordingly. For example, when U. Business Cycle Expansions and Contractions. It has declined to a more sustainable region of Its decline in recent years has been due to higher earnings growth. They are usually paid in company stock or options on their company's stock a form of payment that is supposed to align the interests of management with the interests of other stock holders.
The stock price can increase in one of two ways: This can influence business decisions in several ways:. From Wikipedia, the free encyclopedia. Cyclically adjusted price-to-earnings ratio Fundamental analysis List of finance topics Stock market Stock market bubble Stock market crash Stock valuation Value investing Valuation using multiples. Irrational Exuberance 2d ed.
Retrieved 18 December Retrieved from " https: Use dmy dates from April All articles with unsourced statements Articles with unsourced statements from August Views Read Edit View history.