Investing term
What is Price-to-earnings (P/E) ratio?
How many dollars you pay per dollar of annual earnings — written as 'NN×'.
The price-to-earnings (P/E) ratio is how many dollars you pay for each dollar of a company's annual earnings, written as a multiple like "20×." It's the most common valuation shorthand: a high P/E implies the market expects strong growth, a low one implies caution or doubt. It only means something in context — compared to the company's history, its peers, and its growth rate.
For example
A stock at $100 earning $5 a share trades at a P/E of 20 — you're paying $20 for each $1 of current annual profit.
Price-to-earnings (P/E) ratio is taught hands-on in Stage 15 — Valuation for Investors.
See the lesson →