The Price-Earnings Ratio (P/E ratio) is a valuation of a company's current share price compared to its per-share earnings. It’s calculated as: Current Value per Share / Earnings per Share (EPS).In general, a high P/E ratio suggests investors are expecting higher earnings growth in the future, compared to companies with a lower P/E. The P/E ratio doesn't tell us the whole story by itself, so it's more useful to compare the P/E ratios of one company to other companies in the same industry, the market in general, or against the company's own historical P/E. If Apple is trading at $108.73 per share, and its trailing twelve months' EPS is $6.45, calculate the P/E ratio as: $108.73 / $6.45 = 16.85 Now compare Apple’s P/E Ratio to other companies in the industry. If Microsoft’s P/E ratio is 18.31, International Business Machines (IBM)’s is 12.47, and Hewlett-Packard Company’s is 14.39, then the ratio suggests that investors have the highest expectations for earnings growth from Microsoft, and the lowest from IBM.