Valuation Ratio comprises several calculations used to establish whether a particular security is low-priced or expensive when compared to certain measures such as profits or enterprise value. Such a ratio serves as a benchmark against which computed values can be compared. An example of a valuation ratio is the price-to-earnings (P/E) ratio which is used to compare a company's share price to its earnings per share to determine whether the shares are overvalued or undervalued. In business valuation analysis, the P/E ratio is one of the methods business valuators apply to determine the fair market price of a business entity. The P/E ratio is one of the methods under the market approach.