Glossary · from the DESK dictionary
Price-to-Earnings Ratio (P/E)
The share price divided by earnings per share — shows how expensive a stock is relative to its profit.
In plain words
Roughly: how many years of current profit it would take to 'earn back' the share price.
Formula
P/E = Share price / EPS
Divides the current share price by earnings per share (usually trailing 12 months or forward estimate).
Example
A $100 stock with EPS of $5 has a P/E of 20.
What it means for traders
One of the most widely used valuation metrics, often compared across an industry.
Common pitfalls
Says little on its own about growth, quality, or risk — should never be looked at in isolation.
Related terms
CAPE Ratio (Shiller P/E) · Earnings Per Share (EPS) · Earnings Yield · P/E Ratio Expansion · PEG Ratio (Price/Earnings-to-Growth Ratio) · Price/Earnings-to-Growth Ratio (PEG) · Price-to-Cash-Flow Ratio · Price-to-Sales Ratio
From the DESK dictionary. For information only, not investment advice.
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DESK is a research tool and not investment advice. Page generated: 2026-10-12.