What is the PE Ratio?
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The P/E Ratio is calculated as stock price divided by earnings per share. It indicates how expensive a stock is relative to its earnings and is often compared against the S&P 500's average P/E. A common guideline is to buy stocks trading below their three-to-five-year average P/E.
Think about price relative to earnings, often compared to the S&P 500 average. A common tip is to buy below a stock's own three-to-five-year average.