P/E Ratio

What is the P/E Ratio?

The price-to-earnings ratio measures how much investors are willing to pay for each rupee of a company’s earnings. A P/E of 20 means you pay ₹20 for every ₹1 of annual profit per share.

How to interpret it

A high P/E can mean the market expects strong future growth — or that the stock is overpriced. A low P/E can signal a bargain — or a business in decline. P/E is only meaningful compared against the company’s own history and its sector peers.

What’s a good P/E?

There is no universal "good" P/E. Indian large-caps often trade at 18–28×; high-growth names command more, cyclicals less. Compare like-for-like within a sector.

Common mistakes

• Comparing P/E across different sectors — a bank and a software firm are not comparable.
• Ignoring earnings quality — one-off gains can temporarily depress P/E.
• Using P/E alone for loss-making companies, where it is meaningless.