What is the P/E ratio and why is it important?
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The Price-to-Earnings (P/E) ratio measures a company’s current share price relative to its earnings per share (EPS). It is important because it provides investors with an idea of the company’s valuation and profitability: \[ \text{P/E Ratio} = \frac{\text{Share Price}}{\text{Earnings Per Share (EPS)}}\]