The price-to-earnings ratio, or P/E 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. This helps them assess whether a stock is overvalued or undervalued compared to its peers. However, it is important to consider other factors, such as market conditions and company fundamentals, when making investment decisions.