P/E . . .
is a commonly used abbreviation for the price-earnings
ratio. It refers to a multiple applied to a company’s earnings (net
operating profit after tax) to estimate its value. For example, a
company with earnings of $500,000 and a P/E of twelve would have an
estimated value of $6 million (or twelve times $500,000). Dividing
that value by the number of outstanding shares gives an estimated
value for each share of company stock. See: