Price-to-Earnings Ratio (P/E)

The Price-to-Earnings Ratio (P/E) is a financial metric used to evaluate a company's stock price in relation to its earnings. It is calculated by dividing the current market price of a share by the company's earnings per share (EPS). A higher P/E indicates that investors expect future growth, while a lower P/E may suggest the stock is undervalued or the company is facing challenges. Essentially, the P/E ratio helps investors assess whether a stock is fairly priced based on its profitability, providing insight into the company's potential for growth relative to its current earnings.