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What is P/E Ratio?

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Written by Bode
Updated 2 years ago

Price-to-Earnings ratio compares a company’s stock price to its earnings per share. It expresses how much an investor is willing to pay for one Naira/Dollar of a company’s profitability. So, it can tell you how “expensive” a stock as related to each Naira/Dollar of profitability.

P/E Ratio = Price per share /Earnings Per Share

Example:

As of November 2019, Apple had a P/E ratio of over 20, meaning investors are willing to pay $20 for each dollar of Apple’s profitability. 

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