What is the price-earnings The price / earnings (P / E) ratio is another measure of particular interest to investors in public companies

. The P / E gives you an idea of what you pay the c urrent price of stock shares for each dollar of profit. Practical support to the market value of shares, not the book value of shares that is listed in the budg et. The P / E is a reality check on how high the current market price of the underly ing profit context that it deserves. Extraordinarily high P / E ratio is only if investors believe the company earnings per share (EPS) has a lot of potential i s warranted in the future. The P / E is calculated by dividing the current market price of the title of the most recent 12 months trailing edge of diluted EPS. Stock share prices bounce f rom day to day and are subject to great changes in the short term. The current P / E ratio should be compared with the stock market average P / E ratio to evalu ate whether the business of selling above or below the market average. P / E is currently high, despite a decline in the stock market four years ago. P / E varies from industry to industry and from year to year. One dollar of EPS o nly with a market value of $ 10 for a mature company in an area of zero growth i n command, while likely to have an EPS of dollars in a dynamic company in a grow th industry with a market value of $ 30 for every dollar of income, net income. In summary, the price-earnings ratio or P / E ratio of the current market price of a share capital divided his final 12 months diluted earnings' per share (EPS) or its basic earnings per share if the "company did not report diluted earnings per share. A low P / E may signal an underbalued stock or a pessimistic forecas t by investors. A high P / E may reveal an overvalued stock can be based, or wit h an optimistic forecast by investors.