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Price-Earnings Ratio

(P/E) Ratio: A tool for comparing the prices of different common stocks by assessing how much the market is willing to pay for a share of each corporation's earnings.

Additional Comments:

It is calculated by dividing the current market price of a stock by the earnings per share.

A stock's PE is a very subjective number and is directly comparable to other companies that provide the same product or service.

To compare General Electric to Intel would be an unfair comparison; they do completely different things. For the most part, the company you are considering should have a PE that is lower than that of other comparable companies.

Related Terms:

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Price to Sales
Per dollar of shareholder value, how much business does this company generate? Price to sales (P/S) ...

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