price-to-earnings (P/E) ratio

The price-to-earnings (P/E) ratio is a financial metric that compares a company's current stock price to its earnings per share (EPS). It shows how much investors are willing to pay for each dollar of the company's profit. A high P/E suggests investors expect future growth and are willing to pay more, while a low P/E may indicate the stock is undervalued or the company faces challenges. Essentially, the P/E ratio helps assess whether a stock is reasonably priced based on its earnings and growth prospects.