What is the P/E Ratio? A Simple Explanation

The price-to-earnings ratio (P/E ratio) can be rephrased as the ratio of a company's stock price to its earnings per share. This metric is a popular tool used by investors to assess the relative value of a company's stock. A higher P/E ratio generally indicates that investors are willing to pay more for each dollar of earnings, which could suggest that the company is expected to grow at a faster rate in the future. However, it's important to note that the P/E ratio should be considered alongside other financial metrics and industry context for a comprehensive evaluation.