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Economic Definition of p-e ratio. Defined.

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Term p-e ratio Definition: Also termed the price-earnings ratio, this is the ratio of the current price for one share of corporate stock to the earnings (profit) per share of stock. This is used by many financial analysts and investors as an indicator of a company's performance and potential for future growth. A relatively high price-earnings ratio suggests that investors think the company has a great deal of future growth potential. It can also be a sign, however, that the company is seriously overpriced and due for a big drop.

 

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