Company Health

What is P/E Ratio?

How expensive a stock is compared to its profits

Full Explanation

Price-to-Earnings ratio = stock price ÷ earnings per share. It shows how much investors pay for every $1 of profit. High P/E = expensive. Low P/E = cheap (or struggling).

Real-World Example

Stock at $100, earns $5/share → P/E of 20. Investors pay $20 per $1 of profit.

Pro Tip

Compare P/E to competitors, not random numbers.

Related Company Health Terms

Earnings Report

A company's quarterly report card

EPS

How much profit a company makes per share

Free Cash Flow

Actual cash left after all expenses

Gross Margin

Revenue left after subtracting the direct cost of making the product

View all Company Health terms →

Track Real Stocks on Mr. Guy Invests

Free portfolio tracker, AI tutor, hedge fund tracker, everything explained in plain English.

Create Free Account

Free forever. No credit card needed.