P/E Ratio

What the price-to-earnings ratio tells you, trailing versus forward P/E, real examples, and why a “cheap” or “expensive” P/E never tells the whole story.

Price compared with profit

The price-to-earnings ratio, or P/E, compares a stock’s price with the company’s earnings per share. A stock at $60 with earnings of $3 per share has a P/E of 20. You can think of it as how many dollars investors are paying for each $1 of yearly profit.

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