1. I thought to bring this simple rule which can help one to be a winner in the stock market by buying stocks based on ‘Price-to-Earnings Ratio’ or ‘P/E Ratio’ of the stock.
2. One can calculate P/E of a stock by using the below formula
P/E of a share = Share price of the company/ Earnings per share
where, the Earnings per share = Net Profit made by the company during the previous year/ Total number of shares in the company.
3. Thus if one can pick a quality stock at a lower P/E value as compared to other stocks in same sector, one is bound to be a winner in the stock market.
4. Similarly this method can be also be used for trading in Nifty options and futures also by buying below Nifty P/E value of 15 and selling above Nifty P/E value of 25. One can state the Index P/E as a ratio of the share price of all the underlying companies forming the index to the annual profit (earnings) of these companies.
2. One can calculate P/E of a stock by using the below formula
P/E of a share = Share price of the company/ Earnings per share
where, the Earnings per share = Net Profit made by the company during the previous year/ Total number of shares in the company.
3. Thus if one can pick a quality stock at a lower P/E value as compared to other stocks in same sector, one is bound to be a winner in the stock market.
4. Similarly this method can be also be used for trading in Nifty options and futures also by buying below Nifty P/E value of 15 and selling above Nifty P/E value of 25. One can state the Index P/E as a ratio of the share price of all the underlying companies forming the index to the annual profit (earnings) of these companies.
