Price-to-Earnings Ratio (P/E)

What is P/E Ratio?

The price-to-earnings ratio (P/E ratio) compares a company's current stock price to its earnings per share (EPS), showing how much investors are willing to pay for each dollar of earnings. A higher P/E suggests investors expect strong future growth, while a lower P/E may indicate the stock is undervalued or that the company faces near-term headwinds. The P/E ratio is one of the most widely used valuation metrics in equity analysis, allowing investors to compare companies within the same industry and assess whether a stock trades at a premium or discount to its historical average.