BBG gave you a good explanation but it not go far enough. What the P/E ratio is telling you is how many dollars you have to invest to earn $1 of earnings. For Apple, you have to pay $13.52 to buy $1 of earnings. For another company that is selling at $6 per share, you may have to pay $20 for a dollar of earnings, and another may cost only $9 for $1 of earnings, although that stock may be selling for $48 per share.

In other words you see that Apple is cheaper than the stock with a P/E ratio of 20, and more expensive than the P/E stock of 9. But the stock with a ratio of 20 may be selling at $6 per share while the stock with the 9 ratio is $45 per share. So you have a chance to compare how expensive a stock is relative to what it earns, rather than just comparing the price per share.

However, there are reasons why you may prefer the $6 stock with a ratio of 20 rather than the ratio of 9. That $6 stock may have earnings that are growing rapidly and have a lot of potential because of the industry in which it operates. The stock may be worth $80 per share in three years. The 9 ratio may remain at 9 for the next 5-6 years with the price of the stock not budging much beyond the current $45 price. But the 9 ratio may have less risk than the 20 ratio.

The P/E ratio is the price divided by the earnings.

When you buy the stock, you are paying $13.52 per $ that Apple earns. It's a measure how expensive a stock is.

No. It does not mean that.

The P in P/E ratio means price per share of stock.

The E in P/E ratio means earnings per share of stock.

Bear with me...editing to add more. :-)

The E (earnings) is usually expressed in a dollar format. It means the amount of profit the company had per share of outstanding stock.

Let's say last quarter Company A had earnings of $200 million and there were 100 million shares of stock. The company's earnings per share are $2/share. That is your E.

Let's say the stock price of Company A is $34 per share. 34 is your P (price).

The P/E ratio would be 34/2. It would normally be expressed as one number..in this case 17.

Price of the stock divided by earnings (per share) (aka EPS)

I'm in a personal finance class and we're doing a project about stocks.

I chose apple.

So I have to explain what P/E ratio is and what the actual ratio for Apple is.

The definition I got is "a comparison of price and earning"

And it's a ratio so it's a percent. The pe ratio of Apple is 13.52.

Does this mean you're paying 13.52% more than what you will earn per share?