What is P/E ratio?

In terms of an IPO, P/E is the issue price divided by the most recent Earning Per Share EPS. This ratio tells you if the issue is under-priced or over-priced vis-à-vis the industry P/E. All other things being equal, if the P/E of the company is less than the industry P/E then the issue is under-priced. If the P/E of the company is higher, then the issue is over-priced.

 

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