📐 What Is a P/E Ratio & Why It Matters?
Stock Literacy • Valuation Metrics • Smart Investing
The P/E Ratio (Price-to-Earnings) helps investors understand whether a stock is cheap or expensive relative to its profits 📊. It’s one of the most used valuation tools in the world of investing 🌍.
Formula 🧮
P/E Ratio = Stock Price ÷ Earnings Per Share (EPS)
Why P/E Matters 🎯
- Shows investor expectations
- Lower P/E = possibly undervalued
- Higher P/E = growth priced in
- Helps compare competitors
Example: A P/E of 40 means the stock costs 40× its yearly earnings. High-growth companies often have higher P/Es 🚀.
P/E is not perfect — but it’s a powerful starting point to study a company’s valuation 🔍.
Educational & informational only — not financial advice.
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