P/E ratio

Definition:

Current stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings.

Nearby Terms

P/E P/E effect P/E ratio P/S P2P

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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