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Price/Earnings (P/E) Ratio

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The price/earnings ratio (P/E ratio) provides a comparison of the current market price of a share of stock and that stock's earnings per share, or EPS (which is figured by dividing a company's net income by its number of shares of common stock outstanding). For example, if a company's stock sold for $30 per share and it posted earnings per share of $1.50, that company would have a P/E ratio of 15.

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