Price to Earnings
Definition
"A valuation ratio of a company's current share price compared to its per-share earnings.
Definition
"A valuation ratio of a company's current share price compared to its per-share earnings.
Calculated as:
Market Value per Share / Earnings per Share (EPS)
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
Also sometimes known as "price multiple" or "earnings multiple."
source, Investopedia
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