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price to earnings ratio (P/E)

price to earnings ratio (P/E)

definition

A measure of a company's relative market value, calculated by dividing the price per share by net earnings. A lower P/E when compared to other companies in the same industry can indicate that the security may be currently undervalued in the market. See Value Investing.

Related Terms

 • trailing P/E  • forward P/E  • price to cash flow ratio  • bubble  • overvalued  • undervalued  • value investing