 The price earnings ratio, which is usually just called the PE ratio, appears in the Wall Street Journal stock listings and online. It tells us how much greater the stock price is than the earnings of a company. The PE ratio is a measure of stock marketability. The PE ratio tends to gauge how expensive, or cheap, a stock price is. Those with PE ratios less than 20 tend to be considered cheap stocks. Here's an example of Berkshire Hathaway's stock as of April 30, 2015. Notice that the market price is over $214,000 per share. However, its PE ratio is under 20, which makes us a cheap stock or a good value. Here is an example of SiriusXM's satellite radio stock as of April 30, 2015. Notice that the market price is under $4 a share. However, its PE ratio is almost 50, which makes this an expensive stock or not a good value. The PE ratio is calculated as the market price of the stock, divided by the earnings per share. If you need help with earnings per share, I would encourage you to watch the video on that. For 2016, I assumed the market price is $50 per share. I divided that by our previously calculated earnings per share, and the resulting PE ratio is almost 30, which makes this stock a little on the expensive side.