eli5: What does it mean when a CEO/CFO says “we are trading at 5x”?
In: Economics
A common statistic people look at is price divided by earnings per share. 5x means that the price of the share is 5 times the company’s earnings per share. When a company has high P/E, it’s considered overvalued, and traders are speculating that the company will do well in the future. If they have a low P/E, it means the traders are expecting the company’s earnings to decrease from what it is now.
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