P/E ratio
The share price divided by earnings per share, showing how many dollars investors pay for each dollar of trailing profit.
The price-to-earnings ratio is the share price divided by earnings per share. Trailing P/E uses the last twelve months of reported EPS and is the default on many screens. A higher P/E implies investors expect faster growth or are willing to pay more for each dollar of earnings.
On our site, P/E uses GAAP or adjusted EPS depending on the view, and this is labeled. Check the basis before comparing across companies.
Traders care because P/E puts a price on earnings. Comparing it with the company's own history and with peers shows whether a stock is expensive relative to its record. One-off items distort it.
Worked example (illustrative numbers, not real data): a stock trades at 60 dollars with trailing EPS of 3.00, a P/E of 20. If a one-off gain adds 0.60 per share to EPS, the reported P/E falls to about 16.7, which overstates how cheap the stock is.