Sample Essay

The Price-Earnings Ratio (or the Price-Earnings Multiple as it is commonly referred to) is a summary measure which primarily reflects the following factors—growth prospects, risk characteristics, shareholder orientation, corporate image, and degree of liquidity. The market price per share may be the price prevailing on a certain day or the average price over a period of time. The earnings per share are simply: profit after tax less preference dividend divided by the number of outstanding equity shares. Tesco’s statements show 1.11 for 2005, 98.05 for 2006, 85.27 for 2007, 72.63 for 2008 and 72.63 for 2009.

This again shows an increasing trend and this shows the company’s earnings per share are good and so is the market price per share so it’s a valuable share or attractive for investors and especially for short or medium term investors. Dividend Yield a measure of the rate of return earned by shareholders. Generally companies with low growth prospects offer a high dividend yield and a low capital gains yield. On the other hand, companies with superior growth prospects offer a low dividend yield and a high capital gains yield. Tesco’s statements show 0.39 in 2005, 0.01 in 2006, 0.01 in 2007, 0.01 in 2008 again and 0.01 again in 2009.This shows Tesco is a company of superior growth offering a low dividend yield and a high capital gains yield. Obviously the other ratios and the statements show the company has been growing continuously over the five years and this has made it attractive for investors

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Essay: The Price-Earnings Ratio of Tesco Plc
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