PE ratio, or Price-to-Earnings ratio, is a financial metric that measures the relationship between a company's stock price and its earnings per share (EPS). It is calculated by dividing the current market price per share of a company's stock by its EPS.

There are several types of PE ratios that investors may use, including:

  1. Forward PE

ratio: This is based on estimated earnings for the upcoming fiscal year.

  1. Trailing PE ratio: This is based on the company's earnings over the past 12 months.
  2. Shiller PE ratio: This is a modified version of the PE ratio that uses inflation-adjusted earnings over the past 10 years. It is also known as the cyclically adjusted PE ratio (CAPE).

Investors may use the PE ratio as a way to evaluate whether a stock is overvalued or undervalued. A high PE ratio may indicate that a stock is expensive relative to its earnings, while a low PE ratio may suggest that it is undervalued. However, it's important to consider other factors when making investment decisions, such as the company's financial health, growth prospects, and industry trends.

Investors can use the PE ratio as a tool for identifying potential investment opportunities. For example, they may look for companies with a low PE ratio relative to their peers or historical averages, which may indicate that the stock is undervalued. However, it's important to do thorough research and analysis before making any investment decisions, as the PE ratio alone may not provide a complete picture of a company's financial health and growth prospects.