What is PE Ratio ?

The Price-to-Earnings (P/E) ratio is a widely used valuation metric in the stock market to measure a company's current share price relative to its per-share earnings. It is calculated by dividing the current stock price of a company by its earnings per share (EPS). The P/E ratio provides an indication of the market's view of a company's future earnings potential and growth prospects. A higher P/E ratio means that the market is willing to pay more for each dollar of earnings, while a lower P/E ratio suggests that the market is valuing the company's earnings lower.

For example, if a company has a stock price of $100 and earnings per share of $5, the P/E ratio would be 20 (100 / 5). This means that investors are willing to pay $20 for each $1 of earnings. The P/E ratio can be used to compare the relative valuations of different companies in the same industry or to compare the valuation of a single company over time.

It's important to note that P/E ratio should not be used in isolation and that investors should consider other factors such as the company's financial health, industry trends, and economic conditions before making investment decisions