Saturday School: What Is the Price-to-Earnings Ratio?

Stock market
Photo by violetkaipa / Shutterstock.com

Listen to any discussion of stocks, and you are bound to hear the term “P/E ratio.” But when the talking heads on CNBC utter the phrase, do you know what it means?

Watch this Khan Academy video to learn what the price-to-earnings ratio represents, and why it is crucial to understand the concept if you plan to buy individual stocks .

What indicators do you look for before you buy or sell a stock? Let us know in the comments below or on our Facebook page.

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