Price to Earnings ratio ( P / E ratio)

The Price to Earnings ratio (P/E ratio) is a valuation ratio of a company's current share price compared to its per-share earnings.

The P/E ratio is used for measuring market performance and can be calculated as:

P/E ratio = Market Value Per Share / Earnings Per Share

For example, a company that earned $10M last year, with a million shares outstanding, had earnings per share of $10. If that company's stock currently sells for $100 per share, it has a P/E of 10.