What is Price-to-Earnings Ratio (P/E Ratio)?

The price-earnings ratio (also known as the P/E ratio, P/E, or PER) is the ratio of a company's share price relative to the company's per-share earnings. The ratio is used to determine the relative value of a company's shares, and whether the share price is currently overvalued or undervalued. The price-earnings ratio can also be used to compare a company's current value to its historical value, or to compare different aggregated markets against each other over a period of time. The P/E ratio is a key tool for fundamental analysts determining an asset's intrinsic value.