P/E ratio (price-to-earnings)
The P/E ratio divides a company’s share price by its earnings per share, showing how much investors pay for each dollar of profit.
The price-to-earnings (P/E) ratio is a share price divided by earnings per share (EPS). A P/E of 20 means the market is paying about $20 for every $1 of the company’s annual profit. It is one of the most widely used valuation measures.
A lower P/E can indicate a cheaper valuation relative to current earnings, but it can also reflect a business the market expects to shrink. A higher P/E often reflects expectations of future growth. P/E is most meaningful when comparing companies within the same industry.
A negative or zero P/E is not "low" — it means the company has negative or no earnings, which is a materially different situation from a low positive P/E. stocks-llm labels these cases distinctly and never treats a negative P/E as "cheap."
See more terms in the stocks-llm glossary.
Informational only — NOT financial advice. This is an educational definition, not a recommendation to buy or sell anything. Metrics on stocks-llm are delayed data and may be missing or stale. Always verify information independently and consult a qualified financial professional before making any investment decision.