price-to-earnings ratio

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price-to-earnings ratio

The analyst reviews the company's price-to-earnings ratio on her financial chart.

Definition
  1. Noun:
    • A financial metric: The price-to-earnings ratio is a valuation measure calculated by dividing a company's current share price by its earnings per share (EPS) over a specified period, typically the last twelve months.
    • An indicator of market expectations: It is commonly used by investors to assess whether a stock is overvalued or undervalued relative to its earnings and to compare the valuation of different companies.
Usage Examples
  • Noun:
    • A low price-to-earnings ratio might suggest the stock is undervalued.
    • Analysts often compare companies within the same industry using their price-to-earnings ratios.
    • The stock's high price-to-earnings ratio reflects strong investor confidence in its future growth.
Advanced Usage

  • "Forward price-to-earnings ratio": A variation that uses forecasted future earnings instead of historical earnings in the calculation.

    • The forward price-to-earnings ratio is based on projected earnings for the next fiscal year.

  • "Trailing price-to-earnings ratio": The standard calculation using the company's earnings over the past twelve months.

    • The trailing price-to-earnings ratio provides a view based on actual past performance.
Variants and Related Words

  • P/E ratio (n): A common abbreviation for "price-to-earnings ratio."

    • The P/E ratio is a key figure in the financial report.

  • Earnings multiple (n): Another term often used synonymously with the price-to-earnings ratio.

    • The company trades at a high earnings multiple.
Synonyms
  • Valuation ratio: A broader category of metrics used to assess a company's value, which includes the P/E ratio.
  • P/E: The standard abbreviated form.
Related Phrases
  • Price-to-earnings growth ratio (PEG ratio): A refinement of the P/E ratio that also factors in a company's expected earnings growth rate.
    • The PEG ratio can provide a more complete picture than the price-to-earnings ratio alone.
price-to-earnings ratio

The analyst reviews the company's price-to-earnings ratio on her financial chart.

Noun
  1. (stock market) the price of a stock divided by its earnings

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