Price-to-Earnings Ratio (P/E) shows the ratio of a company's stock market price per share to its earnings per share (EPS). P/E ratio is used to quickly assess whether a company's stock is "fairly" valued. P/E is calculated using the following formula:
$$P/E = \frac{Stock\; Market\; Price}{EPS}$$
Generally, a P/E ratio value in the range of 10-20 is considered normal.
FAQ
What does the P/E ratio measure?
It compares a company's share price with its earnings per share.
What is a normal P/E range?
The exact range depends on the market, but 10 to 20 is often treated as a rough benchmark.
Why do investors use it?
It is a quick valuation metric for comparing companies and sectors.
