what does price to earnings tell you 
price to earnings is a popular multiple used by investors and analysts when they value stocks this multiple compares the company s market value with its earnings a high p e is indicated by a high market value compared to its earnings this means that the company is overvalued a company is said to be undervalued when it has a low p e or when its market value is low compared to its earnings the bottom linethere are many tools you can use to evaluate the health and well being of different companies multiples allow you to highlight their growth how efficient they are and how well they re performing this is done by dividing one metric by another price to earnings and enterprise value to sales are just two common multiples that analysts and investors can use to ensure that your analysis is as accurate as possible make sure you use different multiples rather than relying on one set 