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What is the "price-to-earnings ratio"?

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What is the "price-to-earnings ratio"?

The price-to-earnings ratio is a ratio that measures a company's value, in the sense that the top of that ratio is going to be the value of the company. The bottom of the ratio is its earnings. We call that a PE in the market. On average, the market really has a PE of about 20. That's going to represent a good solid growth company. The PE ratio can be a good relative indicator within an industry of the relative value someone might put on a company. A higher PE ratio is going to be a growth company. It has good earnings relative to its price. A low PE ratio can be an example of a value company. Its price relative to its earnings are low, and so people just don't feel that it has a lot of great prospects and an example of a company that could be in distress.

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What is the "price-to-earnings ratio"?

What is the "price-to-earnings ratio"?

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What is the "price-to-earnings ratio"?

What is the "price-to-earnings ratio"?

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