Financial Terms / pe ratio

# What is the P/E Ratio?

The P/E ratio is a useful tool for investors to assess the potential value of a company.

## What is a P/E ratio?

`The P/E ratio (Price-to-Earnings ratio) is a measure used by investors and analysts to assess the current value of a company relative to its earnings.`

## What are Forward P/E and Trailing P/E?

`Forward P/E and Trailing P/E are the two most common P/E ratios. Forward P/E is the ratio of a companyâ€™s current share price to its expected earnings over a specific period of time. Trailing P/E is the ratio of a companyâ€™s current share price to its actual earnings over the same period of time.`

## How is P/E ratio calculated?

`The formula for calculating P/E ratio is: P/E ratio = Stock Price / Earnings Per Share. `

## Key Points

Calculation of P/E Ratio
The P/E ratio is calculated by dividing the price of a stock by its earnings. This is the most common way to calculate this ratio.
Current Price
The P/E ratio is typically calculated using the current price of a stock. This can be used to measure the valuation of the stock in the present moment.