Price-to-Earnings Ratio (P/E Ratio)
The Price-to-Earnings Ratio (P/E Ratio) is a financial metric used to measure the relative value of a company’s stock. It is calculated by dividing the current stock price by the company’s earnings per share (EPS). The P/E ratio is an important indicator of a company’s financial health and can be used to compare the relative value of different stocks. It is also used to determine the company’s expected future performance.
History of the P/E Ratio
The P/E ratio was first developed in the late 19th century by Benjamin Graham, an American economist and investor. He used the ratio to compare the relative value of different stocks. Since then, the P/E ratio has become a widely used tool for investors to evaluate stocks and make investment decisions. It is also used by analysts to assess the overall health of the stock market.
Comparison Table
| Company | P/E Ratio |
|---|---|
| Apple | 25.5 |
| Microsoft | 30.2 |
| 33.3 |
Summary
The Price-to-Earnings Ratio (P/E Ratio) is a financial metric used to measure the relative value of a company’s stock. It is calculated by dividing the current stock price by the company’s earnings per share (EPS). The P/E ratio is an important indicator of a company’s financial health and can be used to compare the relative value of different stocks. For more information about the P/E ratio, investors can visit websites such as Investopedia, Yahoo Finance, and The Motley Fool.
See Also
- Price-to-Book Ratio (P/B Ratio)
- Price-to-Sales Ratio (P/S Ratio)
- Price-to-Cash Flow Ratio (P/CF Ratio)
- Dividend Yield
- Earnings Yield
- Return on Equity (ROE)
- Return on Investment (ROI)
- Debt-to-Equity Ratio (D/E Ratio)
- Price-to-Free Cash Flow Ratio (P/FCF Ratio)
- Price-to-Earnings Growth Ratio (PEG Ratio)
