Using P/E Ratios to Estimate Your Company’s Value

When customers ask about valuing their company with the Price-to-Earnings (P/E) method, here’s how it works:

1. Find comparable companies – We look at listed companies in the stock market that operate in the same or similar business as yours.
2. Calculate their P/E ratios – P/E = Price per share ÷ Net income per share (EPS). We use net income from the latest 4 quarters.
3. Smooth out market volatility – Because stock prices change every day, we don’t just take one number. Instead, we calculate average P/E ratios over multiple periods (7, 15, 30, 60, 90, 120, 180, and 360 days). This gives us a range of P/E ratios rather than a single figure.
4. Apply to your company – We multiply each P/E ratio by your company’s net income (from the last 4 quarters). This gives us a range of possible company values using the P/E method.
5. Get share price – To find the value per share, we divide the company value by the number of outstanding shares.

The result: instead of one rigid number, you get a valuation range that reflects both your company’s performance and how the market values similar businesses.

🚀 Want to know how much your business is worth?
At ORNA, we provide independent and professional business valuation services tailored to you.

👉 Message us today for a consultation.

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