Ask a Fool: What is the P/E Ratio?

In the spirit of better investing, and in celebration of the first annual Worldwide Invest Better Day (WWIBD) coming up on September 25, Motley Fool analysts will be answering user- and reader-submitted questions leading up to the big event. "Ask a Fool" anything, and we'll do our best to help you investbetter.

The P/E ratio, or price-to-earnings ratio, is one of the most watched and also most misunderstood metrics out there for investors. In the following video, analyst Austin Smith explains the ins and outs of calculating and interpreting a P/E ratio. First, our Foolish analyst considers that the median stock in the S&P 500(SNPINDEX: ^GSPC) has historically had a P/E ratio of about 15. He then zeros in on a few companies' current ratios for closer examination. Watch the video below to learn more.

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The article Ask a Fool: What is the P/E Ratio? originally appeared on

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