what is price to earnings ratio in a stock market
The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings.The price-earnings ratio can be calculated as: Market Value per Share / Earnings per Share.For example, suppose that a company is currently trading at $43 a share and its earnings over the last 12 months were $1.95 per share. The P/E ratio for the stock could then be calculated as 43/1.95, or 22.05.his form of the price-earnings ratio is called trailing P/E, which may be calculated by subtracting a companyâs share value at the beginning of the 12-month period from its value at the periodâs end, adjusting for stock splits if there have been any.