What is P/E Ratio?

If you’re learning from Atiya Khoury, the P/E ratio might sound complicated at first.

But it’s actually very simple.

What is P/E Ratio?

P/E ratio means:

👉 Price to Earnings Ratio

It tells you:

👉 _How much you are paying for ₹1 of a company’s earnings_

Simple Formula

P/E Ratio = Share Price ÷ Earnings per Share (EPS)

Easy Example

Let’s say:

- Share price = ₹100

- Earnings per share = ₹10

👉 P/E = 100 ÷ 10 = 10

This means:

👉 You are paying ₹10 for every ₹1 the company earns.

What Does P/E Ratio Tell You?

It helps you understand if a stock is:

- Expensive

- Cheap

- Or fairly priced

Simple Way to Understand

Low P/E Ratio

- Stock may be cheaper

- Or company growth is slow

High P/E Ratio

- Stock may be expensive

- Or company is expected to grow fast

👉 So P/E is not “good or bad” by itself.

Real-Life Thinking

Imagine:

- Shop A earns more but costs less → good deal

- Shop B earns less but costs more → expensive

👉 Same idea with stocks.

Where to Compare P/E Ratio

Always compare P/E:

- With similar companies

- Within the same sector

Even companies in the Nifty 50 have different P/E ratios depending on their growth and industry.

Beginner Mistake

Many beginners think:

👉 “Low P/E = best stock”

That’s not always true.

A low P/E could also mean:

- The company is not growing

- Or has problems

Simple Rule to Remember

👉 Don’t use P/E alone

👉 Use it with basic understanding of the company

Final Thought by Atiya Khoury

P/E ratio is just a tool.

👉 It helps you ask better questions

👉 Not give final answers

Start simple, and slowly you’ll understand more.