Price-to-Earnings is the most widely-quoted valuation multiple in finance. It answers a simple question: how many dollars do investors pay for each dollar of annual earnings? P/E of 20x means \$20 of stock price for every \$1 of EPS.

The S&P 500's long-run average is roughly 18-20x; in extreme bull markets it has reached 30-35x; in crashes it has compressed to 10-13x. The metric is simple to compute and almost always available — and that simplicity is also why it's the most-misused valuation metric in finance. P/E in isolation tells you nothing useful; P/E in context tells you a lot.

P/E ratio = Share Price ÷ Earnings Per Share. Two flavors. Trailing P/E uses actual last-12-months EPS — backward-looking but uses real numbers.

Forward P/E uses analyst estimates of next-12-months EPS — forward-looking but depends on the accuracy of estimates (which are systematically optimistic on average).