Price-to-earnings ratio (P/E) is one of the first stock analysis terms people learn about. It's a very simple calculation that gives you an idea of the current valuation of a company based on its earnings. Although it is a simple metric and one most people will say they understand, there is more to just knowing that the lower the P/E ratio the cheaper the valuation of the stock.
For those of you who are beginners lets take a quick look at the calculation. P/E is just as it appears, price divided by earnings. Typically you will see
(TTM) when viewing a P/E ratio, this stands for Trailing Twelve Months. In other words, it is using the stock's earnings for the most recently reported 12 months.
