Price-Earnings Ratio . . .

is the relationship of the market value of a company’s stock to its after-tax earnings expressed as a fraction with the current share price as the numerator and the current per share after-tax earnings as the denominator. For example, if a company’s stock sells for $10 a share and its per-share earnings for the year is $1, the company’s price-earnings (or P/E) ratio is ten to one, or ten. Companies in industries that boast high P/Es make attractive investments for venture capitalists because they require fewer dollars of earnings to support a high company valuation and stock price. See: Emerging Growth Companies, P/E, Pricing.