Financial Terms Glossary
The most important financial terms - with simple and concise explanations.
P/E ratio (Price-Earnings Ratio)
The price-earnings ratio (P/E ratio) is a financial metric that indicates how many times a company’s earnings are reflected in its share price. The P/E ratio is calculated by dividing the current share price by earnings per share. A low P/E ratio can indicate that a company is undervalued. However, the P/E ratio should always be considered in context by comparing it to the company’s historical values, the P/E ratios of comparable companies, or the industry average. The P/E ratio should always be used together with other indicators to make well-informed investment decisions.