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Computerized Investing > Second Quarter 2010

Price-Earnings Ratios

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by Cara Scatizzi

The price-earnings ratio (P/E) is arguably the most popular price multiple. There are numerous definitions and variations of the price-earnings ratio. In its simplest form, the price-earnings ratio relates current share price to earnings per share. The higher the ratio, the more investors are paying for each dollar of earnings. For example, if a stock has a price-earnings ratio of 25, it means that investors are paying $25 for each $1 of earnings.

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