If you've ever questioned if a stock was worth its price tag, you're already weighing out the options like a trader. The Price-to-Earnings ratio (P/E ratio) is one of the most basic ways to look at this question. Think of it this way: when you go into a store to buy a laptop, you look at the price compared to what you’re getting, right? Storage capacity, processing speed, battery life. The P/E ratio does the same thing with a stock. It shows you how much you are paying for every dollar of the company’s earnings. Here’s the short and simple: stock price is what you are paying, and earnings is what the company is actually ripping in. The P/E ratio is your price to value meter. In other words, when Apple trades at a P/E of 28, it means the market is willing to pay $28 for every dollar of Apple’s annual earnings. That may sound expensive, but the market is pricing that stock, or earning, based on some confidence of future growth in th...