P/E Ratio (Price-to-Earnings)
The ratio of a company's stock price to its earnings per share.
What Is P/E Ratio (Price-to-Earnings)?
The P/E ratio tells you how much investors are willing to pay for each dollar of a company's earnings. A P/E of 20 means investors pay $20 for every $1 the company earns. It's the most commonly used valuation metric in stock analysis.
Formula
P/E Ratio = Stock Price / Earnings Per Share (EPS)Why It Matters
A high P/E might mean the stock is overvalued or that investors expect high future growth. A low P/E could indicate undervaluation or that the market sees problems ahead. Comparing P/E to sector peers gives the most useful context.
Typical Ranges: Depends on sector. S&P 500 average is ~20-25. Tech stocks often trade at 30-50+. Utilities and banks are usually 10-18.
Real Examples from Our Database
Based on the latest data in our system. Values may change.
Related Terms
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