how to analyze a company part two price to earning ratio PE ratio which is one of the important metrics because it shows if the company is overvalued or undervalued to get PE ratio we need to divide the share price by EPS which is earnings per share for example if the company share price is 280 rupe and the EPS is 2.5 we will get 112 PE ratio what is it even mean it means for every rupee this company earns the market is willing to pay 112 rupees now how do you know if this is overvalued or undervalued for this we need to compare with competitors from the same industry let's say the competitors are averaging between 50 and 70 then 112 is a bit high on the valuation unless it is a new company which has very high potential for growth PE ratio is a crucial metric to analyze a company but it is not just enough follow for the next part