Price-to-earnings ratio
Share price divided by earnings per share.
Plain languagePractical exampleConnected reading
01
What is it?
Share price divided by earnings per share.
02
Why does it matter?
It compares how much the market pays for each unit of current or expected earnings.
03
How should it be read?
Check trailing versus forward periods, one-offs and sector differences.
04
Common mistake
Treating a low P/E as automatic proof of cheapness.
A simple example
A 100 price and 10 of annual earnings per share imply a 10x P/E.