Price-to-Earnings ratio

What is the Price-to-Earnings (P/E) Ratio?

The Price-to-Earnings (P/E) ratio compares a stock's market price to its earnings per share (EPS). It indicates how much investors are willing to pay for each dollar of a company's earnings.

Formula:

Price per Share/Diluted Earnings per Share (TTM)

What Does the Price-to-Earnings Ratio Indicate?

A high or low P/E ratio can suggest different things. A high P/E ratio is often interpreted as the stock being expensive or overvalued, while a low P/E ratio might indicate that the stock is undervalued or relatively cheap. However, this isn't always the case. Companies with high growth potential may have elevated P/E ratios because investors expect future earnings growth to justify the current valuation.