The Price to Earnings (P/E) ratio is a widely used metric to evaluate the valuation of a company’s shares. It is calculated by dividing the market value per share by the earnings per share (EPS). A high P/E ratio could mean that a company’s stock is over-valued, or investors are expecting high growth rates in the future. Conversely, a low P/E ratio might indicate that the company is undervalued or that investors expect future downturns. This ratio is used by investors and analysts to compare the relative value of companies in the same industry or sector.
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Jenna Lofton, MBA is a stock trading and investment expert with over a decade of experience in the financial industry. She began her career as a financial advisor on Wall Street and now helps everyday investors make smarter financial decisions through StockHitter.com.
Her insights simplify complex financial topics into actionable strategies for beginners and seasoned traders alike.