What is the significance of the P/E ratio in stock analysis?
A. Profit and Earnings ratio
B. Price and Earnings ratio
C. Portfolio and Equity ratio
D. Percentage and Earnings ratio
B. Price and Earnings ratio
The P/E ratio is a key metric used in stock analysis to assess the valuation of a company. It helps investors understand how much they are paying for each dollar of earnings the company generates. 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 consider other factors in conjunction with the P/E ratio when making investment decisions.