What is P/E and EPS in stocks?

I really want to expand my knowledge to trade successfully. Please help.

EPS is earnings per share. You can get it by dividing net profit of a company by number of total shares outstanding. You should be able to get this information in many financial websites or company's annual report. You can search online for more info. P/E is price to earnings ratio. Just divide the price of a share by earning of the share. It says how much investors are ready to pay to buy a share of the company. P/E is usually used to see the valuation of a share price. One can use it to compare how a company is valued across its peers. Never compare PE of one sector to another sector. Some used to say, high PE is costly and low PE is cheap, technically it is true, but some shares will trade most of the times at higher PE like DMART/Eicher/PAGE etc

Thank you for this informational reply. I was very confused when I read it online. It would be helpful if someone would explain with own experience.

As an investor, I first decide the sector to invest, then will look for top 3 players in the sector. Will buy them when they are trading near 50 day moving average or if they correct to 100 or 200 DMA. I'll just buy and hold forever unless things go wrong in company. To keep the shares as an asset not an something to book profit in medium term etc. So I really don't look at PE of shares.

This sound like a very smart strategy. Thank you for the reply. What if something in the company goes wrong? How would you act?

Need to understand whether the issue is company specific or is it impacting all companies in the sector. If it is sector specific issue, look to add in dips. If it is company specific, need to see if this is something that the management will come over or things will go out of control. Need to wait for sometime. If things don't improve on company specific issue, then exit. There will be loss or erosion of notional profit, but that's fine as all investments has its own associated risks

Yes, I have heard that the patience is the key in the stock market. Still how do you determine when to exit?

There are many things to consider. 1) Corporate governance issues - Recently seen with Vakrangee/PC jewellers. 2) No growth in business - I was holding Sarla Performance for three years, but their subsidiaries were not performing good and they closed their US plant due to low utilisation - I lost patience and exited with little loss. 3) Poor working capital management - Kwality/Amar Remedies etc

I really appreciate this helpful reply. These are really the important points to consider. Thank you!