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Definition

<p style="text-align: justify;"><span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">Companies</span> which have an erratic flow of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">profits</span> are usually "poorly-rated" by <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">investors</span>. This means that their <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">shares</span> will trade on lower multiples of their <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">earnings per share</span> than "<span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">highly-rated</span>" shares whose <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">earnings</span> flow is more reliable and consistent. The rating of a company is revealed in its <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">P:E</span> ratio which divides the current <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">share</span> <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">price</span> by the most recent year's earnings per share. A high P:E ratio means that the share is highly rated and vice versa.</p>