A company's stock price is driven by its ability to generate profits.The P / E ratio compares those two things directly - It's the company's share price divided by its earnings per share.

What investors need to be aware of is the macroeconomic outlook and the sub-sector to which the stock belongs, thus allowing you to select the most promising stocks and value them more accurately.

Earnings per share (EPS) is total net income (minus dividends paid on preferred stock) divided by the total number of shares in the company that people own。The higher the EPS, the higher the profitability。