The turbulence created by DeepSeek has rattled U.S. tech stocks, prompting investors to seek better opportunities elsewhere. With market uncertainty looming, many are shifting their focus to undervalued stocks with more potential.
One key metric for evaluating a stock’s profitability is the price-to-earnings (P/E) ratio. This is calculated by dividing the stock’s price by its earnings per share (EPS). EPS measures how much profit a company generates for each outstanding share of its common stock.
Here’s an example:
- Stock price: $10
- Earning per share: $2
- Price-to-earnings ratio: 5
The P/E ratio is valuable for assessing whether a stock is undervalued or overvalued. Generally, a lower P/E ratio suggests a more attractive investment opportunity, which may indicate that a stock is trading below its intrinsic value. However, P/E ratios should always be analyzed in context with other factors, including industry trends, market conditions, and a company’s growth potential.
