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Define low PE ratio.

Updated: 9/14/2023
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15y ago

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A PE ratio is the price to earnings multiple for a stock. It is the current stock price divided by the earnings per share for the past 4 full quarters reported. So, if a stock is trading at $15 a share, the company earned $5 million dollars over the last 4 quarters and the company has 5 million shares outstanding, then the PE ratio would be 15 (15 / (5/5)).

A low PE ratio then is a multiple that considers the stock cheap relatively, either to all other stocks, to other stocks in its industry, or to its growth prospects.

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