Price Earnings Ratio

Definition of 'Price Earnings Ratio'

The market price of a share divided by its earnings (e.g. profits) gives the p/e ratio, which is the most commonly used measure of the value of a share.

Although this is used to show the value of a share, it is a subjective test, as, for example some investors would consider a PE ratio of 20 to be too high, and others might consider it to be just right.

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