How do you calculate the P/E ratio by industry?
You could sum the P/E ratio of all the companies in the industry and divide it by the number of companies to find the average P/E ratio of the industry.  Average P/E ratio of industry  = Sum of P/E ratio of all companies in   Industry / Number of companies in industry
"To calculate a sector (or index) P/E ratio you need to sum the market caps of the constituent stocks and divide it by the sum of the total earnings of the constituent stocks (including stocks that have negative earnings).  There are no ""per share"" figures used in the calculation. Beware when you include an individual stock that there may be multiple issues associated with the company that are not in the index.... eg. Berkshire Hathaway BRK.B is in the S&P 500 but BRK.A is not.  In contrast, Google has both GOOGL and GOOG included in the S&P 500 index but not its unlisted Class B shares.  All such shares need to be included in the market cap and figuring out the different share class ratios can be tricky." When fundamentals such as P/E make a stock look overpriced, analysts often point to other metrics. The PEG ratio, for example, can be applied to cast growth companies in a better light.  Fundamental analysis is highly subjective. For further discussion on the pitfalls of fundamentals, I suggest A Random Walk Down Wall Street by Burton Malkiel. In the equity markets, the P/E is usually somewhere around 15.  The P/E can be viewed as the inverse of the rate of a perpetuity. Since the average is 15, and the E/P of that would be 6.7%, r should be 6.7% on average. If your business is growing, the growth rate can be incorporated like so: As you can see, a high g would make the price negative, in essence the seller should actually pay someone to take the business, but in reality, r is determined from the p and an estimated g. For a business of any growth rate, it's best to compare the multiple to the market, so for the average business in the market with your business's growth rate and industry, that P/E would be best applied to your company's income. Fund performance at NAV (%) for latest quarter, YTD, and average annual total returns for 1, 3, 5, 10 years. P/E ratio (1 yr. forecast), P/B ratio, Beta, Sharpe ratio, Wtd. avg. market cap, fund assets.  I guess I would want to calculate all these things based off of the data that I would be working with. I will assume I am working with daily fund values per share over 10+ years. "I am doing an assignment for a finance class, and I am writing a recommendation for a specific capital structure. One of the concerns brought up by the ""board of directors"" was interest coverage, so in my addressing that topic in my report, I want to compare to competitors. The interest coverage ratio under this capital structure that I'm choosing is 11.8 and the two competitors we are given information on are Company A (who has an interest coverage ratio of 6.67) and Company B (who has an interest coverage ratio of 11.25). It seems good, but my concern is that I may be missing something, as Company A is similar in size (in terms of sales) to the company I am writing a report for while Company B has ~50 times more sales than the company I am writing a report for.   Advice, things to consider as I move forward?" "What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. ""Annual earnings are $1. What is the share price?"" ""Question has no answer""" I think the most concise way to understand EV is the value of the *operating assets* of the firm. It's most generally used when using income statement or cash flow ratios that are unlevered - before applying interest expense (which if the firm is optimally financed, in theory should only impact the equity). Examples include revenue, EBIT, EBITDA, unlevered FCF, etc.  In your hypothetical scenario, you would expect the equity value of the firm to increase linearly as cash builds up. In other words, in some implausible, ceteris paribus formulation of the firm, the enterprise value should remain constant. The problem you'll have is that premium income is a vague term so you have to figure out what they mean by a) premium and b) income. Gross or net of reinsurance and acquisition  costs? Written or earned basis?  Combined ratios are also a pig, very commonly they are loss ratio + expense ratio --- but of course loss ratio is losses incurred / premium earned while expense ratio is expenses paid / premium written so it's a self-inconsistent measure. And then there's investment income, and then there's reserve releases...