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P/E Ratio Formula Explanation
The basic P/E formula takes the current stock price and EPS to find the current P/E. EPS is found by taking earnings from the last twelve months divided by the weighted average shares outstanding. Earnings can be normalized for unusual or one-off items that can impact earnings abnormally. Learn more about normalized EPS.
The justified P/E ratio is used to find the P/E ratio that an investor should be paying for, based on the companies dividend and retention policy, growth rate, and the investor’s required rate of return. Comparing justified P/E to basic P/E is a common stock valuation method.
Why Use the Price Earnings Ratio?
Investors want to buy financially sound companies that offer a good return on investment (ROI). Among the many ratios, the P/E is part of the research process for selecting stocks because we can figure out whether we are paying a fair price. Similar companies within the same industry are grouped together for comparison, regardless of the varying stock prices. Moreover, it’s quick and easy to use when we’re trying to value a company using earnings. When a high or a low P/E is found, we can quickly assess what kind of stock or company we are dealing with.
Now based on IVN's pojected earnings in 2024 of OVER 2 dollars per share and the average P/E of the grouped companies in the same sector which is 25, IVN's share price could be past 50 dollars at 4.50 copper price. If we use the projected 9 dollar copper price as per Goldman, than IVN's share price would be OVER 100 dollars. ALL the info as to how to get IVN's earnings can be found on the IVN website. NOT TOO HARD TO CALCULATE IF YOU FINISHED HIGH SCHOOL.