P/E Ratio
The P/E (price-to-earnings) ratio tells you what you're paying for each dollar of a company's yearly profit: share price divided by earnings per share. A P/E of 20 means you're paying $20 for every $1 the company earns in a year. Lower isn't automatically cheaper — fast growers earn higher multiples — but it frames what you're paying for.
Example: A $100 stock earning $5 per share has a P/E of 20 — right around the market's long-run average of 20 to 25.
Related
Educational content only — not financial advice.