The Price-to-Earnings (P/E) ratio measures how much investors are paying for each dollar of a company's earnings. A P/E of 20 means investors pay $20 for every $1 of annual earnings. A high P/E can indicate a growth stock or an overvalued stock. A low P/E can indicate a value stock or a company with declining prospects. The average S&P 500 P/E ratio is around 15–25.
Related Terms
The Price-to-Sales (P/S) ratio compares a company's stock price to its annual revenue per share. It ...
Earnings Per Share (EPS) is a company's net profit divided by its total number of outstanding shares...
Book value is a company's total assets minus its total liabilities — essentially what would be left ...
Free cash flow (FCF) is the cash a company generates from its operations after spending on capital e...
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