📝 What is PE Ratio? (Price to Earnings Ratio)

🔍 What is PE Ratio? (Price to Earnings Ratio) Imagine you go to buy an ice cream 🍦. There are two stalls: 1️⃣ First stall sells 1 ice cream for ₹10. 2️⃣ Second stall sells the same ice cream for ₹30. You’d think — “Hey! The first stall is cheaper, better deal!” 😍 This is what investors do while checking PE Ratio for stocks! 🎯 What is PE Ratio? 👉 PE Ratio = Price of 1 Share ÷ Earnings Per Share (EPS) ✔️ It tells you: “How much money are you paying to earn ₹1 of the company’s profit?” ✅ Low PE = Cheaper stock 🍔 ❌ High PE = Expensive stock 🍕 For example: ✔️ Share price = ₹100 ✔️ EPS = ₹10 PE Ratio = ₹100 ÷ ₹10 = 10 ➡️ You are paying ₹10 to earn ₹1 profit. 🎨 Funny Example: Bunty and Monty both sell lemonade 🍋: Bunty's Stall: ✔️ Price per glass = ₹50 ✔️ Profit he makes per glass = ₹5 PE Ratio = 50 ÷ 5 = 10 Monty’s Stall: ✔️ Price per glass = ₹100 ✔️ Profit he makes per glass = ₹2 PE Ratio = 100 ÷ 2 = 50 👉 Bunty is cheaper — you get more value for less price! 😍 🤔 How to Use PE Ratio? 1️⃣ Compare with Other Stocks: ✅ A stock with PE 10 may be cheaper than one with PE 30. But BE CAREFUL: Cheap is not always best. Maybe the company is in trouble! 😨 2️⃣ Compare with Its Own History: 👉 If a company’s normal PE is 15 but now PE is 25 — maybe stock price is too high! 🚀 3️⃣ Compare with Industry Average: 👉 Tech stocks may always have high PE 🔧, but cement companies may have low PE 🧱. So don’t compare apple with oranges 🍎🍊! 💥 When Low PE is Good? ✔️ Company making profit ✔️ No big debt ✔️ Strong business 👉 Then Low PE = Bargain! 🛍️ 🚨 When Low PE is Bad? ❌ Company losing customers ❌ No growth ❌ Possible bankruptcy 👉 Then Low PE = Value Trap 😱 💥 When High PE is Okay? ✔️ Fast-growing business 🚀 ✔️ New technology ✔️ Future looks bright ☀️ 👉 Then High PE = Investors ready to pay more for future profits! 🧨 Danger Signs: ⚠️ PE suddenly jumps high — Stock may be overvalued! 💥 ⚠️ PE suddenly falls low — Company may have hidden problems! 😰 🔑 Quick Gyaan for Investors: ✔️ Low PE = Cheap? Maybe. Safe? Not always! ✔️ High PE = Costly? Maybe. But worth it if company grows fast! ✔️ Always check: Profit, growth, debt, industry — not just PE! 🎯 Final Shortcut: ✅ Low PE + Good Company = Possible Investment Opportunity! 🤑 ✅ High PE + Future Growth = Possible Multi-bagger! 🚀 ✅ Low PE + Bad Company = Possible Trouble! ⚠️ 🎈 Funny Tip: If PE looks too low and smells fishy — Run faster than you run from your maths teacher with surprise homework! 🏃‍♂️📚😂 🔍 Simple Summary: ✔️ PE Ratio = Price you pay for ₹1 profit ✔️ Low PE = Cheap-looking, but check quality! ✔️ High PE = Expensive-looking, but maybe bright future! 🎯 "PE Ratio is like checking price tags before buying clothes — Cheap may not always mean best!" 👕💰