P/E Ratio

Share Price Valuation

P/E Ratio

In the stock market, the price to earnings ratio of a stock that is being sold is known as the P/E ratio.

The P/E ratio is the way the price of a share is measured in relation to the net income from the share that a company earns in a given year.

The P/E is used as a means of valuation and the higher a P/E ratio means that new investors are paying more each unit of income, which means that they are paying more for the stock than they would if it had a lower P/E ratio.

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