The price-earnings ratio, also known as P/E ratio, P/E, or PER, is the ratio of a company's share price to the company's earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued. In terms of understanding the ratio, a high ratio implies that investors are willing to pay more for every dollar of earnings. It could also imply that the company is overvalued.