Economics Stock Market Questions
The price-to-earnings (P/E) ratio is a financial metric used to evaluate the relative value of a company's stock by comparing its market price per share to its earnings per share. It is calculated by dividing the market price per share by the earnings per share. The P/E ratio provides insight into how much investors are willing to pay for each dollar of earnings generated by the company. A higher P/E ratio suggests that investors have higher expectations for future earnings growth, while a lower P/E ratio may indicate lower growth expectations or undervaluation of the stock.