P/E Ratio
Also called: price to earnings
A stock’s price divided by its earnings per share, a rough gauge of how expensive it is.
The price-to-earnings ratio tells you how many dollars you pay for each dollar of the company’s annual profit. A high P/E means investors expect fast growth (or the stock is pricey); a low P/E can mean a bargain or a troubled business. It is most useful comparing similar companies, not across wildly different industries.
For example
A $50 stock earning $2.50 per share has a P/E of 20 (you pay $20 for each $1 of yearly earnings).
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