PE Ratio means “Price-to-Earnings” Ratio. The formula for calculating the P/E ratio is Market Value per share divided by Earnings per share.

P=Current share price of the company

E=Earnings per each share

P/E ratio is inversely proportional to company valuation, which means high PE value indicates that the company is overvalued.

Each company has different P/E ratio. Generally P/E ratio is used to identify whether the company is undervalued or overvalued.

This is one of the important factors when it comes to fundamental analysis of the company.

Investing in undervalued companies gives good returns in very short span. There are few screeners in which you can find the list of undervalued companies easily.