I thought of sharing a few tools of the fundamental analysts.

I am starting with the P/E Ratio, which is a a very popular stock analysis ratio.

But as with any financial tool, it has its negatives and positives.

The P/E Ratio is defined as the ratio of a company's current share price compared to its earnings per-share(EPS).

P/E = Stock Price / EPS

Comparing 2 stocks with similar backgrounds If PE of A is 20 and PE of B is 10, then B is considered to be a better buy due to the lower PE.

But some analyst would consider A to be have better growth prospects, so to some extent PE is subjective.

But a general rule is:

Stocks with low PE can be considered as good bargains.

A high PE might be a warning signal of a stock being over priced.

I will try give examples and more details of this interesting ratio later.

If you know something that I have missed do share with us all.