Price-to-Earnings Ratio (P/E)

It tells you how many dollars the market is paying today for one dollar of annual profit. Computed on the last twelve months of earnings it is the trailing P/E; on analysts' estimates for the coming year it is the forward P/E. A high P/E is not automatically expensive, since the market may be pricing in fast growth, so the ratio is best read against peers in the same sector and against the company's own history.