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Search for an ETF or holding
Updated 2mo ago.
Updated 2mo ago.
The price-to-earnings ratio (P/E) compares a stock's price to its earnings per share. A P/E of 20 means investors are paying $20 for every $1 of annual earnings. The higher the ratio, the more "expensive" the stock is considered relative to its profits.
If an ETF like XIC.TO (iShares Core S&P/TSX) has an average P/E of 15 and a U.S. ETF like VFV.TO (Vanguard S&P 500) has a P/E of 25, it means American stocks are relatively more expensive compared to their earnings than Canadian stocks.
The P/E ratio helps you assess whether a market or ETF is expensive or cheap relative to the actual earnings of its companies. For beginners, it's a simple first filter: a very high P/E may signal high growth expectations (or overvaluation), while a low P/E may indicate a good opportunity (or underlying problems).