What Is a P/E Ratio and How Do I Use It in Investing?

The price-to-earnings ratio, or P/E ratio, helps investors know if they're getting a good deal on a stock. Here's how it works.

price and earnings growth ratio chart with magnifying glass and calculator on bright yellow background
(Image credit: Getty Images)

There are as many approaches to analyzing an investment as there are flavors of cake. Some may prefer a vanilla approach that keeps things simple and sweet while others like to dive into the murky depths of a death by chocolate. Regardless of your taste preferences, it's wise to have a method to your madness when picking stocks. 

"Stock prices can move around a lot, so having multiple ways to determine a stock's value is important information when deciding to buy or sell a stock," says Ayako Yoshioka, a senior portfolio manager at Wealth Enhancement Group.

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Coryanne Hicks
Contributing Writer, Kiplinger.com

Coryanne Hicks is an investing and personal finance journalist specializing in women and millennial investors. Previously, she was a fully licensed financial professional at Fidelity Investments where she helped clients make more informed financial decisions every day. She has ghostwritten financial guidebooks for industry professionals and even a personal memoir. She is passionate about improving financial literacy and believes a little education can go a long way. You can connect with her on Twitter, Instagram or her website, CoryanneHicks.com.