The PE Ratio or the Price to Earnings Ratio is used mainly for stock selection. It helps you compare the stock price to the earnings generated by a company. For instance, the PE Ratio measures the price the market is willing to pay for every rupee of a company's earnings.
P/E Ratio = Current Market Price per share / Earnings per share
You must divide the market price per share by the earnings per share or EPS to determine the PE Ratio. The P/E Ratio helps you compare the valuations of individual stocks or even stock market indices such as the Nifty 50.