The price/earnings ratio measures the value that the stock market places on $1 of a company's earnings.

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The price/earnings ratio (P/E ratio) is calculated by dividing a company's stock price by its earnings per share (EPS). It represents the amount of money an investor is willing to pay for each dollar of a company's earnings. Therefore, the P/E ratio measures the market's valuation of a company's earnings.

The Price/earnings Ratio Measures the Value That the Stock Market