all-about-investments

The “P/E” Ratio

The P/E ratio is one of the most popular valuation ratios. It’s called the “Price to Earnings” ratio.

The formula = P/E Ratio = Price per share/Earnings per share

What you need to calculate it: Income statement, most recent stock price. But you don’t need to calculate it yourself.

Important Notes

• What it means: Think of price to earnings as the price you will pay for $1 of earnings.
• A very general rule of thumb is that shares trading at a “low” P/E are value stock, though the definition of “low” varies from industry to industry.