Abstract

This study is focused upon the price-earnings ratio, which is the basis of one of the most popular methods for relative valuation of companies, in terms of the opportunity for its application in Bulgaria. The study investigates the specifics of calculating relevant and reliable average price-earnings ratios (P/E) on the Bulgarian Stock Exchange, Sofia, as well as the relation between actual price-earnings ratios and fundamentals. With regard to this, fundamental price-earnings ratios have also been estimated and compared to actual price-earnings ratios for a group of companies. The results of the study indicate that the average levels of actual P/E ratios, though not high in absolute terms, are generally quite higher than the levels, implied by fundamentals.