This term is only meaningful for companies whose equity shares are traded on a stock market. The P/E ratio is the price-to-earnings ratio.[i] This ratio allows investors and analysts to see the relative value of a company’s shares.
● P/E ratio = current stock price / earnings per share (EPS)
EPS is calculated either by the stock’s performance over the past 12 months or through an estimate of its future performance. A high P/E ratio could mean the stock is overvalued or investors expect the company to do well in the future. You would need to compare your company’s P/E ratio with another company’s or a stock index to see how you are performing.
[i] Investopedia. Investopedia, n.d. https://www.investopedia.com/