PE Ratio (Price Earnings Ratio)

Here is a good article on the Price to Earnings Ratio, how it is calculated and when / when not to use it.

The Price to Earnings (P/E) Ratio is the most commonly used valuation metric used by investors to help determine is individual stocks are reasonably priced. It is a simple ratio to calculate but can be confusing to interpret. The ratio can be useful in some cases yet useless in others. The ratio was popularized by Benjamin Graham - author of "The Intelligent Investor" (a must read for all serious investors). Graham used this financial ratio as a quick way to determine if the company stock was trading on an investment or speculative basis.

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Its important to understand how Price to Earnings is calculated and it is one of the initial tools I use to limit the amount of stocks I need to look through to find a golden opportunity.

Good Luck investing