Price-to-Earnings Ratio (P/E Ratio)
The Price-to-Earnings Ratio (P/E Ratio) is a financial metric used to evaluate a company's current market price relative to its earnings per share (EPS). It is calculated by dividing the stock price by the earnings per share.
The P/E ratio is commonly used by investors to assess the valuation of a company and determine whether a stock is overvalued, undervalued or fairly valued. A high P/E ratio may indicate that a stock is overvalued, while a low P/E ratio may suggest that a stock is undervalued.
It is important to note that the P/E ratio is just one of many financial metrics used to evaluate a company, and should be used in conjunction with other fundamental analysis tools. Additionally, the P/E ratio can vary significantly between industries, so it is best to compare a company's P/E ratio with those of its industry peers for a more accurate assessment.