The Price-to-Earnings (P/E) ratio answers a simple question: how many years of the company's current profit are you paying for in the stock price? The formula is Price per Share ÷ Earnings per Share. For example, a stock trading at $60 with $3 of annual earnings per share has a P/E of 20. You're paying $20 for every $1 of current annual profit.A lower P/E can suggest a stock is cheap compared to its earnings. A…
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