pThe price-to-earnings ratio (or p/e ratio for short) is the most popular way to measure the relative valuation of two stocks. It tells the investor how much Wall Street is willing to pay for $1 of earnings. A $10 stock with $1 EPS (earnings per share) is going to have a P/E of 10 ($10 stock price divided by $1 EPS = 10 p/e). You can also invert this financial ratio to calculate something known as the earnings yield./p