# What is Price to Earnings Ratio and How it Affects Your Investments

### Introduction: What is a price to earnings ratio and what does it measure?

The price to earnings ratio is a stock’s current share price divided by its annual earnings per share. The P/E ratio tells you how much investors are willing to pay for each dollar of the company’s earnings.

The P/E ratio is a popular financial metric that can be used to analyze stocks, bonds, and other types of investments. It can be used to compare the relative value of different investments or as a benchmark for evaluating your own portfolio.

A price to earnings ratio or P/E is a measure of the share price relative to earnings per share. It is calculated by dividing the current market price of a company's stock by its earnings per share.

The P/E ratio is used as a measure of the cost of investing in a company, which reflects how expensive it is for investors to buy shares. The higher the P/E, the more expensive it is for investors to buy shares in that company.

### What is the Difference Between p/e Ratio and Earnings Per Share?

The p/e ratio is a measure of stock value. It is calculated by dividing the share price by the earnings per share. This ratio is used to determine how much investors are willing to pay for each dollar of company earnings.

The EPS, or earnings per share, is a measure of the company's profitability. It is calculated by dividing the net income available to common shareholders by the number of shares outstanding. This metric helps investors see how much money they can expect from their investment in terms of dividends or stock buybacks over time.

### How Do You Calculate Price-to-Earnings Ratio

Price-to-earnings ratio is a measure of a company's current share price relative to its per-share earnings. It is calculated by dividing the company's current share price by its earnings per share.

The higher the P/E ratio, the more expensive the stock is relative to its earnings. Conversely, the lower the P/E ratio, the cheaper it is relative to its earnings.