Price to Earnings Ratio

The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The
P/E ratio has its imperfections, but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public. P/E ratio is an off- quoted
measure of the ratio of the market price of each share of common stock to the earnings per
share. The price-earnings (P/E) ratio reflects the investors assessments of a companys future
earnings. The industry average of P/E ratio is about 26 times in abroad market place. Here,
throughout this report it was our endeavor to assess the investors investing decision. From
2006 to 2010 we represented the total 5 years P/E ratio of 8 insurance firm.

Formula:

Price to Earnings Ratio (Times)

Company
Delta
Fareast
Meghna
Popular
Pragati
Prime
Progressive
Rupali

2010
0.068
0.038
0.022
0.039
0.049
0.068
0.271
0.072

2009
0.045
0.052
0.023
0.087
0.071
0.14
0.470
0.065

Year Wise comparison

2008
0.034
0.039
0.058
0.10
0.094
0.059
0.541
0.051

2007
0.047
0.044
0.053
0.12
0.062
0.064
0.624
0.042

2006
0.047
0.036
0.032
0.093
0.053
0.113
0.470
0.038

Inferences: A stock with a high P/E ratio suggests that investors are expecting higher
earnings growth in the future compared to the overall market, as investors are paying more
for today's earnings in anticipation of future earnings growth. Hence, as a generalization,
stocks with this characteristic are considered to be growth stocks. Conversely, a stock with a
low P/E ratio suggests that investors have more modest expectations for its future growth
compared to the market as a whole.
So, we can asses Progressive life insurance is expecting higher earnings compared the overall
market among 8 insurance firm. Rupali life insurance is also expecting a growth over the
years and therefore, the investors are paying more of their earnings today for future earnings
growth.

Price to sales ratio

A stock's price/sales ratio (P/S ratio) is another stock valuation indicator similar to the P/E
ratio. The P/S ratio measures the price of a company's stock against its annual sales, instead
of earnings. Like the P/E ratio, the P/S reflects how many times investors are paying for
every dollar of a company's sales. Since earnings are subject, to one degree or another, to
accounting estimates and management manipulation, many investors consider a company's
sales (revenue) figure a more reliable ratio component in calculating a stock's price multiple
than the earnings figure. Price to sales ratio tends to focus on the annual sales of a firm
considering the each stock price. As we selected some insurance firm net premium is consider
as the annual sales, in fact the annual sales of policies. The formula for the price to sakes ratio
is given below.

Formula:

Price to Sales Ratio (times)

Company
Delta
Fareast
Meghna
Popular
Pragati
Prime
Progressive
Rupali

2010
1.444
5.206
4.531
3.333
6.62
5.335
15.82
7.897

Year Wise comparison

2009
2008
1.686
2.01
6.742
3.966
4.061
7.022
5.491
4.827
10.33
5.623
8.749
6.671
22.15
18.762
6.526
5.983

2007
2.277
4.752
6.323
3.378
6.395
5.467
19.018
5.983

2006
2.521
5.807
5.485
5.999
4.821
6.692
12.85
9.184

Inferences: From the ratio table we can derive that the investors of the respective firms
would expect the stock price to be timed at their sales holding. Moreover we can say that
Progressive life insurance would pay a higher amount of stock to hold their annual sales. But
researchers conclude that "low price-to-sales ratios beat the market more than any other value
ratio, and do so more consistently. So above analysis infer that Delta life insurance is in a
good position in terms of sales to price (P/S) ratio. In addition Fareast and MSeghna life
insurance also pay low portion for every Tk. to hold the annual sales.