Investors and traders sometimes use what’s called a Price-to-Earnings (P/E) ratio to value a company. It is generally attributed to a strategy of fundamental analysis, which as opposed to technical analysis, is the study of a company’s and its stock’s intrinsic value. This calculation is able to explain how much a company is worth based on its earnings and stock price. Based on its past or future earnings, the P/E ratio highlights what the market or traders are willing to pay today for the company’s stock.