P/E ratio

The P/E ratio is a way to measure how expensive a stock (or company) is. It stands for the Price that you pay for a share of the stock (the "P") divided by the company's Earnings (the "E"). The earnings are simply how much money the company made (profits) in a particular period of time. So, when you look at a P/E ratio, you are looking at how much money you are paying for each dollar that the company made in profits. A high P/E ratio means that the stock is very expensive (relative to how much the company is making).