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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.

Related Terms
		Earnings Per Share Progression Look at the last four quarters of EPS growth to see if the company's earning capacity ... Growth Stocks Growth stocks are issued by companies expected to have sustained high rates of growth in sales ... Value Stocks Value stocks are stocks that have lower prices relative to their fundamental values (growth in sales ...

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