Understanding The P/E Ratio
AAA
  1. P/E Ratio: Introduction
  2. P/E Ratio: What Is It?
  3. P/E Ratio: Using The P/E Ratio
  4. P/E Ratio: Problems With The P/E
  5. P/E Ratio: It's Not A Crystal Ball
  6. P/E Ratio: Conclusion
P/E Ratio: Introduction

P/E Ratio: Introduction


Chances are you've heard the term price/earnings ratio (P/E ratio) used before. When it comes to valuing stocks, the price/earnings ratio is one of the oldest and most frequently used metrics.
Although a simple indicator to calculate, the P/E is actually quite difficult to interpret. It can be extremely informative in some situations, while at other times it is next to meaningless. As a result, investors often misuse this term and place more value in the P/E than is warranted.

In this tutorial, we'll introduce you to the P/E ratio and discuss how it can be used in security analysis and, perhaps more importantly, how it should not be used.

If you don't have a solid understanding of stocks and how they trade on the stock market, we also suggest that you check out our Stock Basics tutorial.

P/E Ratio: What Is It?

  1. P/E Ratio: Introduction
  2. P/E Ratio: What Is It?
  3. P/E Ratio: Using The P/E Ratio
  4. P/E Ratio: Problems With The P/E
  5. P/E Ratio: It's Not A Crystal Ball
  6. P/E Ratio: Conclusion
P/E Ratio: Introduction
RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  3. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  4. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  5. Total Debt-to-Capitalization Ratio

    An indicator that measures the total amount of debt in a company’s ...
  6. Price-To-Cash-Flow Ratio

    The ratio of a stock’s price to its cash flow per share. The ...
  1. Is the Dow Jones a stock exchange?

    Learn about the Dow Jones Industrial Average and its impact. This historically significant index provides a daily snapshot ...
  2. What is the difference between an income statement and a balance sheet?

    Find the current value of a business by reading the balance statement and determine whether operations are efficient by analyzing ...
  3. What are the differences between operating expenses and cost of goods sold (COGS)?

    Discover the differences between operating expenses and cost of goods sold, how each are calculated and why they are considered ...
  4. What are the differences between gross profit and gross margin?

    Learn how gross profit and gross margin are calculated and how each is used in fundamental analysis. Generally, these numbers ...
comments powered by Disqus
Related Tutorials
  1. Industry Handbook
    Investing Basics

    Industry Handbook

  2. Investing For Safety and Income Tutorial
    Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  3. Discounted Cash Flow Analysis
    Fundamental Analysis

    Discounted Cash Flow Analysis

  4. American Depositary Receipt Basics
    Economics

    American Depositary Receipt Basics

  5. Ratio Analysis Tutorial
    Fundamental Analysis

    Ratio Analysis Tutorial

Trading Center