Price to earnings ratio

What is the Price to earnings ratio?

The Price to earnings ratio measures the market price of a stock relative to its earnings per share. This metric shows how much investors are willing to pay for the profits the company generates.

Formula:

Price per share / Diluted earnings per share TTM

What does Price to earnings ratio mean?

A high price to earnings ratio and a low price to earnings ratio can mean different things. Some investors believe that a high price to earnings ratio means a company is becoming expensive and possibly overvalued. A low price to earnings ratio may mean that a company is undervalued or cheap. Of course, this is not always true as sometimes a company has a high price to earnings ratio because it is growing fast and expected to grow into its high price to earnings ratio.

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