What is the PE ratio?
The PE ratio stands for the Price-Earnings ratio.
The price-earnings ratio is a straightforward formula:
Share Price divided by earnings per share.
Earnings per share is calculated by dividing the pre-tax profit for the company by the number of shares in issue.
The PE ratio is seen by some as a measure of future growth of a company. As a general rule, the higher the PE, the faster the market believes a company will grow.
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