P/E (Price-to-Earnings) is the ratio of a company’s share price to its earnings.
Simply put: how many years a company would need to earn back its current price at the existing profit level.
A high P/E means the market believes in growth (or the stock is overheated). A low P/E means either undervaluation or business problems.
The P/E multiple is also referred to as the “Shiller ratio.”
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