What does the PE ratio indicate?
Written by Chanel
Updated over a week ago

Price to earnings ratio (shown as PE Ratio) is just one of many ratios used to determine a company’s value. It displays the company's current share price relative to its per-share earnings.

Broadly speaking, this is thought to show how much an investor would invest in order to receive one dollar of that company’s earnings.

Is a high or low PE better?

There’s no definitive answer for this one, as PE is just an indicator of where a company is at. Generally, a higher P/E ratio indicates investors are expecting higher earnings growth in the future.

A low P/E typically indicates that a company is undervalued or doing extremely well compared to its past performance.

A company’s P/E ratio is updated daily, based on the price of the company’s shares yesterday against their Earnings Per Share (EPS) for the previous years (four quarters).

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