The investment metric that's better than the P/E ratio

By Marcus Padley
Updated August 22 2017 - 4:00pm, first published 1:04pm
Treasury Wine Estates has a high P/E ratio but good growth potential. Photo: Jesse Marlow
Treasury Wine Estates has a high P/E ratio but good growth potential. Photo: Jesse Marlow

All investors know what a price/earnings (P/E) ratio is: it is the price of a share divided by the earnings per share in a particular year. So if a company share price is $1 and it is earning 10c a share this year, it is on a P/E ratio of 10x.