Price-to-Earnings (P/E) Ratio

The P/E ratio divides a company's current share price by its earnings per share. It is the most-cited valuation multiple in equity research because both inputs are public and refreshed continuously.

A higher P/E suggests investors expect faster future growth — or that the stock is overpriced. A lower P/E can mean weaker growth expectations, or genuine undervaluation. Comparison only makes sense within an industry: tech firms typically trade at higher multiples than utilities or banks.

Trailing P/E uses the last twelve months of earnings; forward P/E uses analysts' next-twelve-months estimates. Negative earnings make the ratio meaningless — most data providers display 'N/A'.