What is PE ratio
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What is PE ratio in stock market The Price-Earnings ratio (P/E ratio) is a widely used metric in stock valuation. It compares a company's current share price to its earnings per share (EPS). Essentially, it tells you how much investors are willing to pay for each dollar of a company's current or future earnings. Formula: P/E Ratio = Share Price / Earnings Per Share (EPS) Interpretation: A higher P/E ratio indicates that investors are willing to pay a premium for the company's earnings, suggesting that they expect strong future growth. A lower P/E ratio suggests that the company is less expensive relative to its earnings, which could indicate undervaluation or potential future decline. Important points to remember: P/E ratio should be used comparatively within the same industry or with similar companies. Comparing across industries can be misleading due to different growth rates and profit margins. P/E ratios can be calculated using trailing twelve months (TTM) earnings o