Ratio that establishes a comparison between the price of a share and its net profit, i.e., the number of times a company’s post-tax profit is contained in the price of one of its shares. It is an indicator of what the market would pay for each monetary unit of its profit. The PER of a share is calculated by dividing the share price by the net profit per share, net of taxes. It is one of the most commonly used multiples to estimate whether a company’s shares are expensive or cheap and to compare different similar companies in the same sector. The higher the PER, the lower the net profit compared to its current price. The PER, multiplied by the entity’s net profit, facilitates the obtaining of an indicative value of a company.
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