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Price-Earnings Ratio


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.

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