Financial metrics2 min read
Price-to-earnings ratio (P/E)German: Kurs-Gewinn-Verhältnis (KGV)
The P/E ratio divides a stock’s price by earnings per share. It is a commonly used company valuation metric.
In plain language
Distinguish historical earnings from estimated future earnings. Growth, debt and the business model affect interpretation. With negative earnings, a conventional positive P/E ratio is not meaningful.
Let’s make it concrete
A share costs €60 and the company earns €3 per share. Its P/E is 60 / 3 = 20.
Simplified example for illustration.Worth understanding
A low P/E may reflect risks or falling earnings expectations. It does not prove a stock is a bargain.
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For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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