The Price-to-Earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings . calculated by dividing the current market price of the stock by its earning per share. P/E is one of the most widely-used stock analysis tools used by investors and analysts to determine a stock’s valuation.
The ratio is used for valuing companies and to find out whether they are overvalued or undervalued. P/B ratio, is a financial ratio used to compare a company’s current market price to its book value. The P/E ratio helps investors determine the market value of a stock as compared to the company’s earnings.
P/E Ratio Formula,
P/E Ratio= Market Value Per Share/ Earnings Per Share