What is the P/E ratio?

P/E is share price divided by earnings per share. It shows how much investors pay for each unit of current profit.

Quick Definition

P/E ratio = Share Price ÷ Earnings Per Share. It shows how much investors pay for each dollar of profit. A high P/E implies high growth expectations.

Use this concept with tools

Inflation-adjusted Return

Nominal return vs purchasing-power return.

CAGR

Convert between annualized rate and final amount.

Compound Interest

Growth with recurring contributions and compounding frequency.

Related concepts

What is the P/B ratio?

P/B ratio = Market Price ÷ Book Value Per Share. It compares what investors pay to what the company is worth on paper. P/B below 1 may signal undervaluation.

What is ROE?

ROE (Return on Equity) = Net Income ÷ Shareholders' Equity. It measures how efficiently management generates profit from capital. Above 15% is generally considered strong.

What does market capitalization mean?

Market capitalization = Share Price × Total Shares Outstanding. It represents the total market value of a company and classifies companies as large-cap, mid-cap, or small-cap.