### Definition: What is Price to Earnings P/E Ratio?

**Price Earnings ratio** is also called P/E or price to earnings ratio. It compares the market price per share by earnings per share to calculate the market value of a stock relative to its earning. In other words, P/E ratio shows, what the market is willing to pay for a stock on its current earnings.

Investors use this ratio to find, what multiple of earning a share is worth. This ratio helps the investors to analyze, how much investors should pay for the stock based on its current earnings due to which it is also called price multiple or earnings multiple.

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