• 5. The Price-Earnings Ratio

    This section takes a closer look at the P/E ratio, the most popular valuation multiple among financial analysts. We show how to derive the P/E ratio from a simple valuation model. This allows us to better understand the (implicit) assumptions we make when working with the P/E ratio. We also see that many other multiples are a function of the P/E ratio.

4. Implementation Challenges and Solutions