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Price-to-earnings or P/E ratio, the most used and abused valuation metric in the stock market, is a simple one. And perhaps that is why it has such widespread use. Investors use it as a shortcut for valuing stocks. So, a company with a P/E of 10 becomes cheap while the one with a P/E of 50 becomes expensive.
P/E is the ratio of profit after tax to the total number of shares outstanding. Another way of calculating it is to divide the share price by the EPS. Finding the share price is simple. Complexity starts with calculating earnings. It could be TTM (trailing 12-month earnings) of current/previous year or projected earnings for the forthcoming year.