How do I figure out if a stocks e/p is high or low?

Question

I am doing a project for my economics class and it asks if the e/p of my stock is high or low. I know what the e/p is but I have no idea how to tell if it is high or low. Please help! Thanks.

P.S. It would be helpful if it could be explained as simply as possible, I don't really understand much about the stock market :p

? · Accepted Answer

Earnings per share is usually calculated using earnings per year.  And this E/P ratio you can express as a percentage.  Which basically tells you the return on your investment in the stock per year.

And when you calculate it this way, then you can compare it to the interest rate you get on a 10-year Treasury bond for example.  And if the %yield from the stock is significantly higher than the 10-year bond interest rate, then you can reasonably say that this is a high E/P stock.

Anonymous · Answer

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jeff410 · Answer

You need something to compare it too.  Either other leading companies in the same business, or the average of all the companies in the same industry for a certain length of time like the last five or ten years., or the past earnings of the company you are reporting on.

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How do I figure out if a stocks e/p is high or low?

3 Answers