The PE ratio is a measure of how highly a stock is valued relative to its current earnings.

Question

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The statement is true. The price-to-earnings (PE) ratio is calculated by dividing the current market price of a stock by its earnings per share (EPS). It is a commonly used valuation metric by investors to determine whether a stock is overvalued or undervalued relative to its earnings potential. A higher PE ratio generally indicates that a stock is more expensive and may be considered overvalued.

The PE Ratio Is a Measure of How Highly a Stock