What Is Price-to-Earnings Ratio – P/E Ratio?

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.

P/E ratios are used by investors and analysts to determine the relative value of a company’s shares in an apples-to-apples comparison. It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time.
  • The price-earnings ratio (P/E ratio) relates a company’s share price to its earnings per share.

  • A high P/E ratio could mean that a company’s stock is over-valued, or else that investors are expecting high growth rates in the future.

  • Companies that have no earnings or that are losing money do not have a P/E ratio since there is nothing to put in the denominator.