P/E Ratio - TST's Word of the Day Explained

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Let's talk P/E ratio, shall we?

What does P/E stand for?

It's price-to-earnings (ratio). Think of it like this--it's basically a way for investors to gauge if a company's earnings actually stack up to its share price.

How do you calculate P/E ratio?

To find a stocks P/E ratio- it's easy.

All you have to do is divide the stock's market value per share (or stock price) by the company's earnings per share. TheStreet's Dave Butler digs into trailing and forward P/E ratios and more.  Read What Is a P/E Ratio and Why Is it Important?

How does a company establish its P/E ratio and typical yield?

According to Real Money's Mark Dodosh, "that's a function of the market. If you have years of good data it's easy to look back and see where any particular stock has traded in the past." He says P/E ratios reflect a stock's popularity as well as its ever-changing fundamentals.

Read his take here: Barron's Is Dead Wrong About Death of Reversion to the Mean

Can You Name the Companies Behind These Clever Stock Tickers?

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