How do you calculate the P/E ratio?

The price-to-earnings ratio (P/E) is the relationship between a company's earnings and its share price, and is calculated by dividing the current price per share by the earnings per share. A stock's P/E, also known as its multiple, gives you a sense of what you are paying for a stock in relation to its earning power.

What is a good P/E ratio?

A “good” P/E ratio isn’t necessarily a high ratio or a low ratio on its own. The market average P/E ratio currently ranges from 20-25, so a higher PE above that could be considered bad, while a lower PE ratio could be considered better. However, the long answer is more nuanced than that.

How can the P/E ratio be used to assess a company?

P/E ratios are used by investors and analysts to determine the relative value of a company's shares in an apples-to-apples comparison. It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time.