PRICE- EARNING (P/E) RATIO AS A VALUE INVESTING TOOL

Price Earnings (P/E) Ratio is the most significant Ratio in Share Market. It tells about how much the Investor are ready to pay for per Rupee Earnings of the Company. When P/E Ratio of a Company reduces, it signifies the fear in the minds of Investors regarding the downfall in the growth potential of the Company, while on the other hand when P/E Ratio of a Company increases, it signifies the greed and confidence regarding the Company's future prospects. Thus, P/E Ratio of a company is based on future expected earnings and growth prospects as perceived by Investors regarding the Company and also on speculative factors. The Author in this paper has discussed about the P/E Ratio, its computation and types and how the P/E Ratio may help the Investors in taking their investment decisions in the Share Market.