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Price-to-earnings ratio

The price-to-earnings ratio (P/E ratio) is a financial metric used to assess the relative value of a company's stock by comparing its market price per share to its earnings per share. It is widely used by investors as a tool to evaluate the attractiveness of an investment and to make informed decisions.

Senses and usages:

Noun:

1. A key financial ratio that measures the price investors are willing to pay for each dollar of earnings generated by a company.

Example sentence: The price-to-earnings ratio of Company XYZ is 15, indicating that investors are willing to pay 15 times the company's earnings per share.

2. A tool to compare the relative value of stocks within the same industry or sector.

Example sentence: When considering investments in the technology sector, investors often analyze the price-to-earnings ratio to determine which stocks are undervalued or overvalued.

Related products:

• Value investing books
• Stock market analysis tools
• Financial ratios guides