Price-earnings (PE= price/earnings) ratios are a popular way to gauge the value of a stock. When applying this tool to exchange traded funds (ETFs), investors must be careful, as each ETF provider uses a different calculation to get the PE ratio. The different methods used to calculate PE ratios makes it difficult for investors to comparison shop.
There are various ways to calculate a PE, so be careful when making comparisons. Some data providers exclude unprofitable companies when figuring PE ratios, others include them. Whether they are included or not, there are still different mathematical ways to get a PE ratio, which lead to different results.
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