Price-to-Earnings Ratio (P/E)
What is Price-to-Earnings Ratio?
A company's share price divided by its earnings per share.
Understanding Price-to-Earnings Ratio
The P/E ratio shows how much investors pay for each dollar of earnings. A high P/E can mean expected growth or overvaluation.
Compare P/E ratios within the same industry; typical levels differ a lot between sectors.
Formula
Example
A $60 stock with EPS of $3 has a P/E of 20.
FAQ
What is a good P/E ratio?
There is no single number. Compare a company with its own history and with peers in the same industry.