What Is P/E Ratio?


Quick Answer

"P/E ratio" refers to price/earnings ratio. This involves comparing the price of a company's shares to its earnings per share. A company's P/E ratio is found by dividing the share's market value by the per share earnings.

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Full Answer

Many companies use data from the company's previous four quarters of operation to determine the P/E ratio. Companies can also use estimated earnings to project a P/E ratio for a specific period of time. There are companies that can have a negative P/E ratio, specifically those that are not profitable. These companies may say that their P/E ratio does not exist, or list it as zero.

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