P/E — Price-to-Earnings Ratio
Definition: A company's stock price divided by its earnings per share. P/E is the most common quick valuation multiple.
Example
A stock at $100 with $5 EPS has a P/E of 20 — meaning the market is paying $20 for every $1 of earnings.
When you'll hear it
P/E shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to price-to-earnings ratio — and they expect the room to already know what that means.
FAQs
What's a good P/E ratio?
It depends on growth and industry. Mature utilities trade at 10-15x. High-growth tech can trade at 50x+. Compare within sector.
What does P/E stand for?
P/E stands for Price-to-Earnings Ratio.
What does P/E mean in business and finance?
A company's stock price divided by its earnings per share. P/E is the most common quick valuation multiple.
Where will I hear P/E used at work?
P/E comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for price-to-earnings ratio, so people assume you already know the term.
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