What does P/E Ratio stand for?

The P/E Ratio stands for Price to Earnings Ratio, which is a key financial metric used to evaluate a company's valuation. This ratio compares the current share price of a company to its earnings per share (EPS). The P/E ratio is significant because it provides investors insight into how much they are willing to pay for each dollar of earnings, helping assess whether a stock is undervalued or overvalued based on earnings performance.

A company with a high P/E ratio might be seen as having strong growth prospects, as investors are willing to pay a premium for its earnings. Conversely, a low P/E ratio could indicate that a stock is undervalued or that the company is experiencing difficulties. Investors often use the P/E ratio in conjunction with other financial metrics to make informed decisions about buying or selling stocks.