price-earnings ratio Definition
☆ price·-earnings· ratio (prīs′ʉrn′iŋz)
noun
the ratio of the current market price of a share of stock to the corporation's annual earnings per share
price-earnings ratio Finance Definition
One of the most popular measures for comparing stocks,
measured by taking the price per share and dividing it by the amount of
earnings per share. If this number is large, particularly against other
companies in the industry, the stock is considered overvalued; similarly, low
PE ratios may indicate that a company is undervalued. Many times technology
companies have very high PE ratios, because of the expectations that their
earnings will grow rapidly. Even after the technology market corrected from
2000 to 2002, many PE ratios still remain at relatively high levels.
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