Price-Earnings Ratio - P/E Ratio (redirected from PE ratio)

Price-Earnings Ratio - P/E Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

Notes:

EPS is usually from the last four quarters (trailing P/E), but sometimes can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation is the sum of the last two actual quarters and the estimates of the next two quarters.

Sometimes the P/E is referred to as the "multiple," because it shows how much investors are willing to pay per dollar of earnings.

In general, a high P/E means high projected earnings in the future. However, the P/E ratio actually doesn't tell us a whole lot by itself. It's usually only useful to compare the P/E ratios of companies in the same industry, or to the market in general, or against the company's own historical P/E.

See also: Earnings, Earnings Multiplier, EPS, Market Value, Multiple, PEG Ratio, Price-Earnings Relative