sabina

P/E
The E in the denominator is suppose to represent “normal” EPS. Earnings that include only recurring components at mid-cyclical level (you want to measure,compare and use firm earnings at the middle of the business cycle.)
Inorder to get to this underlying earning figure you have to adjust for
items that are extraordinary (ie both infrequent in occurence and unusual in nature).These include but are not limited to lawsuits or gain/loss from a sale of a subsidiary.
Nonrecurring item would be restructuring provisions. These items can be unusual in nature or infrequent in occurance but not both.
for comparison purposes you also have to adjust for inventory method and COGS
Price/Earnings measure the price you are paying today for 1 dollar of future earnings. the lower the better.