PE ratio

Measurement of a share's performance in the market. The price-earnings ratio is calculated by dividing the current share price by the earnings per share (EPS). The ratio is expressed as a number referred to as a ‘multiple’. The figure shows how many years it would take the company to earn an amount equal to its share value. A share on a high multiple suggests that a company is growing rapidly, meaning that future earnings have been factored in to the share price. A low PE multiple suggests that the company has sluggish growth. The price-earnings ratio is a key indicator for analysts and investors determining whether a share is overvalued, fairly priced, or cheap.