How can we calculate PE ratio of any company and investment strategy apply on it?

PE ratio stands for Price of the share/earnings per share

Price of the share = Mark price of one share of the company
Earnings per share(EPS) = how muct a share of the company earns for u annually. This does not include the movement in share price. They stand for the dividends

Now How to use this ratio ???
PE ratio is generally used to tell whether a share is overvalued or undervalued so that we can enter or exit the stock
Consider a stock X which quotes at 100rs and the EPS of the share is 2 rs
hence PE ratio stands out to be = 100/2 = 50
What does this indicate??
1) The share earns u very less amt per year
2) Paying 100 bucks for a share which earns u 2 rs per share is not advisable and hence the share is over valued.

Generally go for companies that have PE ratios less than 10 or 15 if u are looking for a long term horizon.
However u need to consider the following as well
1) Infosys - PE ratio 30 EPS - 69
This does not mean that Infy is a bad stock. If the the PE ratio is high it must be due to two things - Either the share price must be very high or the EPS must be very low. In such a case look for EPS - Whether the EPS is in multiples or greater than PE ratio. If it is u can go for it.
2) There are some shares which have very good up movement in share price with a bad PE ratio. These are companies which do not pay dividends but re invest them in the company to get better results and in turn to boost the share price.