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Price-Earnings Ratio

The price of a security per share at a given time divided by its annual earnings per share. Often, the earnings used are trailing 12 month earnings, but some analysts use other forms. The P/E ratio is a way to help determine a security's stock valuation, that is, the fair value of a stock in a perfect market. It is also a measure of expected, but not realized, growth. Companies expected to announce higher earnings usually have a higher P/E ratio, while companies expected to announce lower earnings usually have a lower P/E ratio. See also: PEG
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. In stock-index futures, the number multiplied by the futures price to determine the value of the contract. For example, the $500 multiple of the Standard & Poor's Midcap Index is multiplied by the futures price to determine the value of one contract. Thus, a futures price of $230 would yield a contract value of $115,000 ($500 × $230).
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


A stock's multiple is its price-to-earnings ratio (P/E). It's figured by dividing the market price of the stock by the company's earnings.

The earnings could be the actual earnings for the past four quarters, called a trailing P/E. Or they might be the actual figures for the past two quarters plus an analyst's projection for the next two, called a forward P/E.

Investors use the multiple as a way to assess whether the price they are paying for the stock is justified by its earnings potential. The higher the multiple they are willing to accept, the higher their expectations for the stock.

However, some investors reject stocks with higher multiples, since it may be impossible for the stock to meet the market's expectations.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Cells then "expand" or multiply in vitro (in a petri dish) to form a cluster of millions of stem cells.
In 1988, they predicted that a small shift in the angle at which a laser beam enters a multiply scattering medium such as a translucent glass block would also shift the speckle pattern -- without significantly altering its basic structure.
This protein normally plays a helpful role in the healing process, causing needed cells to multiply. But in atherosclerosis, says Ross, PDGF "turns normal response to injury into an exuberant response, resulting in the narrowing of the lumen of the artery."
The drug works by blocking other molecules - proteins called co-factors - that also must attach to the oestrogen receptor for cancer cells to multiply.
However, processing speed and fine motor abilities were decreased in multiply but not singly exposed children.
Law Three: Multiply Money - You make good money, you manage it well, now what are your plans to multiply, increase or grow it?
(NASDAQ: MCRB) has initiated its Phase 3 SER-109 clinical study (ECOSPOR III) in patients with multiply recurrent C.
4 Calculate the following: multiply 22 by 4, subtract 23, multiply by 6, and finally divide by 3.
is, flip the second fraction, then multiply it by the first fraction.
Harriman House, a UK independent publisher of finance, trading and investment books, revealed on Monday that it has published a new edition of Multiply Your Money: The Easy Guide To Savings And Investments by journalist and investment commentator Nick Louth.
The three Africans claimed to a number of people that they could multiply money using a new device and that they could turn Dh100,000 to $3 million.
M2 EQUITYBITES-April 30, 2014-Cell Therapeutics introduces PIXUVRI for treating adult patients with multiply relapsed or refractory aggressive B-cell non-Hodgkin lymphoma, reflecting its first and only approved monotherapy in the EU for this patient population