<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Do you want to participate in a short research study? Help us shape the future of investment tools and get a chance to win a $ 250 gift card!"data-reactid =" 27 ">Do you want to participate in a short research study? Help us shape the future of investment tools and get a chance to win a $ 250 gift card!

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This article is intended for investors who wish to improve their understanding of price / earnings ratios (P / E ratios) To keep it simple, we will show how the P / E ratio of Djurslands Bank A / S (CPH: DJUR) can help you evaluate the value proposed. Djurslands Bank has a price / earnings ratio of 7.65, based on the last twelve months. This means that at current prices, buyers pay 7.65 Danish Kroner for each accrued profit 1. Crowns. "Data-reactid =" 28 "> This article is for investors who wish to improve their understanding of price / earnings ratios (P / E) .To keep it practical, we will show how the P / E ratio of Djurslands Bank A / S (CPH: DJUR) could help you evaluate the proposed value. Djurslands Bank has a price / earnings ratio of 7.65, based on the last twelve months. This means that at current prices, buyers pay DKK 7.65 for each DKK 1 annual profit.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Discover our latest analyzes for Djurslands Bank "data-reactid =" 29 "> Check out our latest analysis on Djurslands Bank

How to calculate a price / earnings ratio?

<p class = "canvas-atom text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The formula for P / E is: "data-reactid =" 31 "> The formula for P / E is:

Price / earnings ratio = Price per share ÷ Earnings per share (EPS)

Or for the Djurslands bank:

P / E of 7.65 = DKK251 DKK32.82 (Based on the last twelve months up to December 2018.)

Is a high price-earnings ratio good?

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A higher P / E ratio means that investors are paying a higher price for each DKK1 of the profits of the company. This is not necessarily good or bad, but high P / E implies relatively high expectations for a company's future results. "Data-reactid =" 36 "> A higher P / E ratio means investors are paying a higher price for each DKK1 of the profits of the company. This is not necessarily good or bad, but a high P / E implies relatively high expectations of what the company can achieve in the future.

How growth rates affect P / E ratios

Earnings growth rates have a big influence on P / E ratios. Earnings growth means that in the future the "E" will be higher. This means that even if the current P / E is high, it will decrease over time if the stock price remains stable. Then, a decline in the P / E ratio should attract more buyers, raising the share price.

Djurslands Bank saw its earnings per share decrease by 16% last year. But EPS is up 16% over the last 5 years.

What is the C / B ratio of Djurslands Bank compared to its peers?

The P / E ratio essentially measures a company's market expectations. The picture below shows that Djurslands Bank has a P / E ratio that is roughly the average of the banking sector (7.6).

CPSE: DJUR PE PEG Gauge February 11th 19

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<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The P / E of the Djurslands Bank tells us that market participants If its outlook is broadly in line with its industry, if Djurslands Bank really outperforms its peers, this should have a positive effect on the stock price.by verifying the mandate and remuneration of the management, among other things. "data-reactid =" 54 "> The Djurslands Bank P / E tells us that market players think that its outlook is broadly in line with that of its sector, so if Djurslands Bank really outperforms its peers, it should be positive for the course of action.by verifying the mandate and remuneration of the management, among others.

Do not forget: the P / E ratios do not take into account the balance sheet

It is important to note that the P / E ratio takes into account the market capitalization and not the value of the business. In other words, the debts and liquidities that the company can have in the balance sheet are not taken into account. In theory, a company can reduce its future P / E ratio by using cash or debt to invest in growth.

Overall, these expenses can be good or bad, but the bottom line here is that you need to look at the debt to understand the P / E ratio in its context.

Review of the Djurslands Bank

Net debt represents only 7.8% of the market capitalization of Djurslands Bank. The market could give it a higher P / E ratio if it had net liquidity, but it is unlikely that this low level of net borrowing would have a significant impact on the P / E multiple.

The verdict on the P / E ratio of Djurslands Bank

Djurslands Bank has a P / E of 7.6. This is below the New Zealand market average of 15. The level of debt is not a major concern, but the lack of growth in EPS probably weighs on investor sentiment.

Investors should look to buy stocks for which the market is not good. If it's underestimated a business, investors can earn money by buying and holding stock until the market corrects itself. We do not have analyst forecasts, but you can better understand its growth by looking at this more detailed historical graph of earnings, revenues, and cash flow.

The story continues

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Of course you might be able to find a better stock than Djurslands Bank. So, you might want to see this free collection of other companies that have greatly increased their profits. "data-reactid =" 67 "> Of course you might be able to find a better stock than Djurslands Bank. So, you might want to see this free collection of other companies that have greatly increased their profits.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To help readers understand the past volatility of the financial market in the short term, our goal is to provide you with a long-term research analysis based solely on fundamental data. Note that our analysis does not take into account the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the actions mentioned. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.

"data-reactid =" 68 "> To help readers overcome the short-term volatility of the financial market, we aim to provide a long-term research analysis based solely on fundamental data. ignores the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the actions mentioned. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.