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What is the P/E ratio? An analytical tool that helps you decide if a stock is a good buy at its current price
What is the P/E ratio? An analytical tool that helps you decide if a stock is a good buy at its current price
Ali HussainDec 15, 2020, 00:22 IST
Looking at a stock s P/E ratio can tell investors if the company is over- or undervalued in relation to its peers and also to its own historical price.hocus-focus/Getty Images
The
P/E ratio (price-to-earnings ratio) measures a company s stock price in relation to its earnings per share.
hocus-focus/Getty Images
The P/E ratio (price-to-earnings ratio) measures a company s stock price in relation to its earnings per share.
A low P/E ratio can indicate that a stock is undervalued, while a high P/E ratio can indicate that a stock is overvalued.
A company s P/E ratio mainly provides insight when compared to others in the same industry, or its sector overall.
When picking stocks to invest in, everyone always wants to get a good deal companies that not only are worthwhile but are trading at a decent price. But how do you determine that decent price? It s not necessarily a question of dollar amounts.