The Price-to-Earnings (P/E) Ratio evaluates a company's stock price against its earnings per share (EPS), indicating how much investors pay per rupee of earnings to assess valuation.
The Price-to-book ratio compares a company's market price to its book value per share, indicating how much shareholders pay for net assets. A lower ratio suggests undervaluation.
The PE Ratio compares a company’s stock price to its earnings per share, whereas the PB Ratio compares a company’s stock price to its book value per share.
The PE Ratio reflects how much investors are willing to pay for each rupee of earnings, whereas the PB Ratio indicates how much investors pay for the net assets of a company.
The PE Ratio is used to gauge future earnings potential and profitability, while the PB Ratio assesses the company’s market valuation relative to its net assets.
The PE Ratio is more effective for companies with significant earnings, whereas the PB Ratio is more relevant for asset-intensive companies.
A high PE indicates strong growth expectations, while a low PE may suggest undervaluation. Conversely, a low PB suggests undervaluation, whereas a high PB may signal overvaluation.
The PE Ratio can be influenced by non-operational factors and market sentiment, whereas the PB Ratio is more stable, based on the tangible book value of the company.