What is difference between EV/Net Income and P/E ratio in relative valuation?

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Accepted Answer

EV/Net Income compares enterprise value to net income, while P/E ratio compares market price to earnings per share.

EV/Net Income considers the entire capital structure of a company, including debt and equity, while P/E ratio only considers the market price of equity.
EV/Net Income is a more comprehensive measure of valuation as it takes into account the company's debt levels, while P/E ratio is a simpler measure based on market sentiment.
EV/Net Income is useful for comparing companies with different capital structures, while P/E ratio is more commonly used for comparing companies within the same industry.
For example, a company with a high EV/Net Income ratio may indicate that the company is highly leveraged, while a high P/E ratio may indicate that the market has high expectations for future earnings growth.

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