Price-earnings ratio (P/E or PER for short), also known as cost-benefit ratio, stock price-earnings ratio or market price-earnings ratio. P/E ratio refers to the ratio of stock price divided by EPS. Or divide the company's market value by the annual profit attributable to shareholders.
P/E ratio is the ratio of share price to earnings per share. The price-earnings ratio widely discussed in the market usually refers to the static price-earnings ratio, which is usually used as an indicator to compare whether stocks with different prices are overvalued or undervalued. It is not always accurate to measure the texture of a company's stock with price-earnings ratio. It is generally believed that if the price-earnings ratio of a company's stock is too high, then the price of the stock is in a bubble and its value is overvalued. When a company grows rapidly and its future performance is promising, when comparing the investment value of different stocks with P/E ratio, these stocks must belong to the same industry, because the company's earnings per share are close and the comparison is effective. P/E ratio is one of the most commonly used indicators to evaluate whether the stock price level is reasonable, and it is a valuable stock market indicator. On the one hand, investors often don't think that the profit figures calculated in strict accordance with accounting standards truly reflect the profitability of the company on the basis of going concern. Therefore, analysts often adjust the company's official net profit by themselves.