Author(s): Aarav Mehta
The Price-to-Earnings (P/E) ratio is one of the most widely used financial metrics for evaluating a stock's value and determining its market price relative to its earnings. This article explores the fundamental components of the P/E ratio, its calculation, and its interpretation, providing investors with a comprehensive guide to understanding its role in stock valuation. By examining different types of P/E ratios—such as trailing, forward, and PEG ratios—investors can better analyze market trends, make informed investment decisions, and gauge the financial health and growth potential of companies. Additionally, this article discusses the limitations of the P/E ratio and offers insights into its optimal usage in combination with other metrics