The P/E (price-to-earnings) ratio is a company's share price divided by its earnings per share, showing how much investors pay for each dollar of profit.
A P/E of 20 means investors pay $20 for every $1 of yearly earnings. 'Trailing' P/E uses the past 12 months of earnings; 'forward' P/E uses analysts' estimates for the next 12 months.
Why it matters to you
P/E is a quick way to judge whether a stock looks expensive or cheap relative to its profits, its history or its peers. It is meaningless when a company has no earnings.