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Meaning / Definition of

Price-to-earnings Ratio (P/E)

Categories: Finance,

The price-to-earnings ratio (P/E) is the relationship between a company's earnings and its share price, and is calculated by dividing the current price per share by the earnings per share.A stock's P/E, also known as its multiple, gives you a sense of what you are paying for a stock in relation to its earning power. For example, a stock with a P/E of 30 is trading at a price 30 times higher than its earnings, while one with a P/E of 15 is trading at 15 times its earnings. If earnings falter, there is usually a sell-off, which drives the price down. But if the company is successful, the share price and the P/E can climb even higher. Similarly, a low p/e can be the sign of an undervalued company whose price hasn't caught up with its earnings potential. Or, conversely, a clue that the market considers the company a poor investment risk.Stocks with higher P/Es are typical of companies that are expected to grow rapidly in value. They're often more volatile than stocks with lower P/Es because it can be more difficult for the company's earnings to satisfy investor expectations.The P/E can be calculated two ways. A trailing p/e, the figure reported in newspaper stock tables, uses earnings for the last four quarters. A forward p/e generally uses earnings for the past two quarters and an analyst's projection for the coming two.

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Definition / Meaning of

Structured Product

Categories: Stocks, Investing and Trading,

financial institutions create investment products, known generically as structured products, that trade on a stock exchange and link the return on an investor's principal to the performance of an underlying security, such as a stock or basket of stocks or to a derivative, such as a stock index.For example, the return on debt securities known as structured notes is determined by the performance of a stock index such as the Standard & Poor's 500 (s&p 500) rather than the market interest rate. The objective is to provide the potential for higher returns than are available through a conventional investment.Each product has a distinctive name, often expressed as an acronym, and its terms and conditions vary somewhat from those offered by its competitors. For example, in some cases the principal is protected and in others it isn't. But some features are characteristic of these complex investments - their value always involves an underlying financial instrument and they require investors to commit a minimum investment amount for a specific term, such as three years.

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