PE ratio (Price to Earnings ratio) - Stock price divided by per share earnings over the past year. For the PE ratio the actual earnings are used (official announced earnings not projected earnings). The earnings per share figure to use are the "fully diluted earnings."
Fully diluted earnings are calculated by assuming that all options are exercised as well as any convertible securities. Normally fully diluted earnings will be a few cents less per share than undiluted earnings (if the difference is larger that indicates there are a large number of potential shares of stock outstanding as options, warrants or convertible bonds).
Curious Cat Investing Library
Dictionary: PE ratio, Dollar Cost Averaging , Balance Sheet
Topics: China - Economics - Real Estate - Trading
Great Investors Focus: Darvas - Livermore - O'Neil - Soros
Authors: Levitt - Schwager Investment Bookstore