Price Earnings Ratio (P/E Ratio)

The P/E ratio (Price Earnings ratio) of a stock (also called its "P/E", or simply "multiple") is a measure of the price paid for a share relative to the annual Earnings per Share (EPS).

The price earnings ratio is widely used valuation multiple used for measuring the relative valuation of companies: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio.