investing

Lingo every investor should know

P-E: a fiscal fitness exercise
Next
4 of 9
Back

Even if you hated high school gym class, you have no reason to dread P-E. In fact, it's a good exercise for measuring the condition of a company. The price-to-earnings ratio is one of the most basic ways to gauge stocks.

To get the P-E ratio is no sweat. Just divide the stock price by its annual earnings per share. If a stock is selling for $10 and it earned $1 per share in its most recent fiscal year, the P-E is 10.

There's no right or wrong ratio: Some companies with low earnings have a high P-E because investors think earnings will grow in the future. Conversely, a reliably profitable company may have a relatively low P-E because its earnings are expected to remain stable. Those are often called value stocks, says Ferri. A P-E can change often, since it is dependent on profit levels and stock prices.


 

 

advertisement

          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

How do I repay IRA loan?

Dear Dr. Don, Hello, I read your column about short-term, 60-day loans from an individual retirement account. How do you withdraw funds from an IRA? Can a person redeposit the funds back into the same IRA? Or can the money... Read more

advertisement

Blog

Sheyna Steiner

‘Blackfish’ sinking SeaWorld stock?

Investors have turned tail and run from SeaWorld stock after this week's earnings report showed that revenue slipped in the second quarter.  ... Read more

Partner Center
advertisement

Connect with us