A key metric in evaluating a stock's value is the price-to-earnings ratio, or P/E ratio. It is calculated by dividing a company's stock price by its earnings per share for the past 12 months. This ratio provides insight into how much investors are willing to pay for a company's earnings. A higher P/E ratio typically indicates a higher growth potential, while a lower P/E ratio may suggest a lower risk investment. As with any financial measure, it's important to consider multiple factors in determining a stock's true value.
