Price-to-Earnings Ratio
P/EHow much investors pay per $1 of earnings
Definition
The Price-to-Earnings ratio tells you how many dollars the market is paying for every dollar of profit a company generates.
Current Stock Price ÷ Earnings Per Share (EPS, trailing 12 months)
Example
If AAPL trades at $200 and earned $6.50/share in the past year, its P/E is 200 ÷ 6.50 = 30.8x. Investors pay $30.80 for every $1 of Apple's earnings.
Typical range
15-25x for S&P 500 large-caps; tech stocks often trade 30-60x