If you have ever wondered what a share’s price to earnings (P/E) ratio is and what its implications are, then here’s an informative article which uses Rightmove as its example.

It explains that Rightmove’s P/E ratio is 27.91, which means that at current prices, buyers pay £27.91 for every £1 in profits.

The formula for calculating P/E is: Price to Earnings Ration = Price per share plus earnings per share.

In Rightmove’s case, that is £4.97 divided by 18p.

A high P/E ratio implies that investors are willing to pay a higher price for the earning power of a business, because they have high expectations of what a company can achieve.

Rightmove’s P/E is higher than the average of 22.3 in its sector, which means that the market expects Rightmove to outperform other companies in its industry.

It is also getting on for double the average of 15.9 in the UK market.

While strong investor expectations of what a company can achieve boosts the P/E ratio, so does a strong balance sheet.

Rightmove has net cash of £6.9m, which means it has plenty of resources for more growth, says the article on the Yahoo Finance website.

https://uk.finance.yahoo.com/news/tempted-sell-rightmove-plc-lon-050500996.html