It's calculated by taking a company’s stock price and dividing by its profits per share

P/E Ratio means “Price to Earnings Ratio” 📝

P/E Ratio is considered one of the most important numbers for investors to know, because it shows a clear relationship between a company's stock price, and its profits 🤑

You can find the P/E Ratio right on Bloom, under each stock page 🔍

Just scroll to the “Stats” section of your favorite stock -- try it with Google

But what do you do with the P/E Ratio ➡️

A high P/E Ratio means the company is not profiting that much relative to its stock price 🥴

📝 $100 price vs. $5 profit/share = 20x P/E ratio, meaning the company is worth 20x more than its profits 🏦

A low P/E Ratio means the company is profiting a lot relative to its stock price 🤑

📝 $100 price vs. $200 profit/share = 0.5x P/E ratio, meaning the company is worth only half as much as its profits 🏦

A negative P/E Ratio means the company is losing money for every share! 😨

Companies with a negative P/E ratio can be incredibly risky 🚨

Different industries have different average P/E Ratios 📊

So, you should always compare your stock's P/E ratio to similar stocks in the industry!

So now you know that. . .

🟢 Low P/E Ratio means possibly undervalued

🟡 High P/E Ratio means possibly overvalued

🔴Negative P/E Ratio means losing money, risky

Now you have a ratio for determining the value of a stock compared to its profits, and you can use it compare similar stocks 🚀