Overview

This price to earnings ratio template is a great tool that shows you how to perform the calculation for the ratio. It also compares the P/E Ratio to the Justified P/E Ratio and emits a rating based on these two metrics. The formula for the justified price to earnings ratio can be represented by one of the following formulas:

P/E = [ (D/E) * (1+g)  ] / [ r - g ]

or alternatively

P/E = Payout Ratio * (1+g)] / [ r-g ]

Where:

P - the current fair market price for the company stock

D - the Dividend per share

E - The cost of equity

r - the required return

g - the growth rate

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