P/E

What does P/E stand for in finance?

Price-to-Earnings Ratio

Investors use a company's P/E, or Price-to-Earnings Ratio, to determine whether the company is valued correctly. A high P/E might mean a stock is overvalued, while a low P/E might mean a stock is undervalued.

P/E is calculated by dividing a company's current stock price by its EPS (earnings per share). Usually, the EPS used is an average from the last four quarters, and the calculated P/E is referred to as a trailing P/E. However, P/E can also be calculated using projected EPSes, in which case it is referred to as a forward P/E.

Example

"Our P/E was down from last year but we hope to bounce back in the next four quarters."
A Redditor explaining how to calculate P/E

A Redditor explaining how to calculate P/E

Related Slang

Usage

Last Updated: April 14, 2022

P/E definition

This page explains what the acronym "P/E" means. The definition, example, and related terms listed above have been written and compiled by the Slangit team.

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