Relationship between p/e and ROE

h21 · April 13, 2016, 5:31pm

I know this must be a basic question, but why is P/E not 1/ROE, is this because ROE is earning per share/book value per share but P/E is market price/earning per share?

S2000magician · April 13, 2016, 5:39pm

ROE has nothing to do with share price.

Look at your formula.

h21 · April 13, 2016, 5:41pm

Return on equity (ROE) = net income / total equity

but if we divide total share number above and below shouldnt we get earning and price per share?

S2000magician · April 13, 2016, 5:48pm

Still, where does price per share enter into it?

h21 · April 13, 2016, 5:53pm

total equity/total share?

S2000magician · April 13, 2016, 5:55pm

Which is book value per share, not price per share, no?

h21 · April 13, 2016, 5:58pm

and THAT, is why I was an idiot about ALAS

S2000magician · April 13, 2016, 6:23pm