Price Earnings Ratio (P/E) is one of the oldest and most frequently used metrics to determine the value of a company’s stock. To calculate the P/E, simply divide the company’s current share price by its earnings per share (EPS).

In general, a higher P/E ratio suggests that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E. It is usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company’s own historical P/E.