It is defined as price-to-earning ratio. It is the ratio for valuing a company that is used to measure company’s current share price relative to its per-share earnings (EPS). It is also known by the names of price multiple or earnings multiple.
It is used by the analysts and investors to compare a firm against its own historical record. Investors also use P/E ratio as it indicates the value of the company and analyse how much they should actually pay for a stock based on its earnings.