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Definition

Price-earnings (P-E) ratio

The price-earnings (P-E) ratio is an oft-quoted measure of the ratio of the market price of each share of common stock to the earnings per share; computed by dividing the market price of the stock by earnings per share.The price-earnings (P-E) ratio reflects investor’s assessments of a company’s future earnings. 

  Price-earnings ratio = Market Price per Share of Stock ÷ Earnings per Share

 

 

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