P/E
Business & Finance abbreviation · Stock Market & Investing
| Stands for | Price-to-earnings ratio |
|---|---|
| Categories | Business & Finance |
P/E stands for Price-to-earnings ratio, a stock market & investing abbreviation.
Valuation ratio equal to a company's share price divided by its earnings per share, showing how much investors pay for each dollar of profit. A higher P/E usually implies higher expected growth or lower perceived risk.
Example: At $150 a share and $6 of EPS, the stock trades at a P/E of 25.
Usage notes
Also written PE or P/E ratio, and called the earnings multiple. Trailing P/E uses the past twelve months' earnings, while forward P/E uses estimates. The long-run average P/E of the S&P 500 is often put at around 15 to 16, though it has spent much of the past two decades higher. Robert Shiller's CAPE ratio averages ten years of inflation-adjusted earnings to smooth the business cycle.
Related abbreviations
More stock market & investing abbreviations
- NYMEX – New York Mercantile Exchange
- NYSE – New York Stock Exchange
- OI – Open interest
- OTC – Over-the-counter
- OTM – Out of the money
- P/B – Price-to-book ratio
- P/S – Price-to-sales ratio
- PDT – Pattern day trader
- PEG – Price/earnings-to-growth ratio
- PFOF – Payment for order flow
- PT – Price target
- RIA – Registered investment adviser