Price-to-earnings ratio (P/E)

A ratio to evaluate a stock's worth. It is calculated by dividing the stock's price by an earnings-per-share figure. If calculated with the past year's earnings, it is called the trailing P/E. If calculated with an analyst's forecast for next year's earnings, it is called a forward P/E. The biggest weakness with either type of P/E is that companies sometimes "manage" their earnings with accounting wizardry to make them look better than they really are. That's why some analysts prefer to focus on the price-to-cash flow measure instead.