Ratios are important in evaluating whether a stock is a good buy or not.
So what is the P/E ratio? It is the ratio of the price divided by the earnings. So you take your stock price (this can be obtained from the stock exchange price quote of the share) and divide it by the company's earnings for the year (this can be obtained from the financial statement - income statement to be precise).
It is better to have a lower value as it means that the earnings is high relative to the price. This would mean that you have bought a winner. Also before buying, it is also good to buy a company that does not have an extremely high number like 100 as that would be mean that the company needs a hundred years of earnings to get to its own price.
However, bear in mind that P/E can be calculated differently. For instance, using a future forecast of earnings instead of current year earnings. Or there might be other problems. So it is good to calculate the P/E yourself using the share price and maybe an average of 3 years of previous earnings. It would give you a better reading of the P/E
