The P/E ratio, or price-to-earnings ratio, is a financial metric used to evaluate a company's stock price relative to its earnings. It is calculated by dividing the current market price of a share by the earnings per share (EPS). A higher P/E ratio may indicate that investors expect future growth, while a lower ratio might suggest that the stock is undervalued or that the company is facing challenges. Investors often use the P/E ratio to compare companies within the same industry, helping them make informed decisions about buying or selling stocks. However, it is important to consider other factors, such as market conditions and company fundamentals, when interpreting the P/E ratio.