P/E Ratio (Price-to-Earnings Ratio)
How much investors pay for each $1 of a company's annual earnings.
What it means
The P/E ratio compares a company's share price to its earnings per share. It tells you how many years of current profit you are paying for when you buy the stock. A high P/E can mean the market expects strong growth, or that the stock is overvalued. A low P/E can signal a bargain, or a struggling business.
Formula
Example
If a stock trades at $100 and earned $5 per share last year, its P/E is 20. You are paying $20 for every $1 of annual earnings.
What is a good P/E Ratio?
There is no universal good P/E; it depends on the sector. The S&P 500 has historically averaged around 15 to 20. Fast-growing tech names often trade above 30, while mature value stocks may sit below 15. Always compare a P/E to industry peers, not across sectors.
See it on real stocks
Every stock analysis page shows P/E Ratio alongside the other key metrics: