What is the P/E ratio? š
š TheĀ price-to-earnings ratioĀ (P/E)Ā is one of the most widely used metrics for investors and analysts to determineĀ stock valuation. It shows whether aĀ company's stock price is overvalued or undervalued and can reveal how aĀ stock's valuation compares to its industry group or a benchmark like the S&P 500 index.
š§® To calculate the Price-to-Earnings (P/E) ratio of a company, you need two pieces of information: the current stock price and the earnings per share (EPS).
Example: We know that Apple company's EPS in 2023 was $6.43 and the current stock price is $189.30, which means we need to calculate this: 189.30/6.43 = 29,44. This is Apple's P/E ratio.
