What this calculator does
The price-to-earnings ratio, or P/E ratio, is one of the most widely quoted stock valuation metrics: it divides a company’s share price by its earnings per share (EPS), giving a figure that shows how much investors are paying for each dollar of the company’s reported earnings.
This calculator works out the P/E ratio formula from a share price and EPS you enter, along with the earnings yield, which restates the same relationship the other way round as a percentage. It is presented for informational purposes only and is not investment advice.
The formula
Divide the share price by earnings per share to get the P/E ratio. Earnings yield is simply 1 divided by the P/E ratio, expressed as a percentage, which restates the same figure as a return rather than a multiple.
| Term | Meaning |
|---|---|
| P/E ratio | Share price ÷ earnings per share, expressed as a multiple. |
| EPS | Earnings per share: the company’s net profit divided by its number of outstanding shares. |
| Earnings yield | (1 ÷ P/E ratio) × 100, the inverse of the P/E ratio expressed as a percentage. |
The inputs explained
| Field | What to enter |
|---|---|
| Share price ($) | The current share price. |
| Earnings per share (EPS) ($) | Earnings per share, usually reported as either trailing (last 12 months) or forward (forecast) EPS. Be clear on which one you are using, since it changes the result. |
When to use it
Comparing two companies in the same industry
P/E ratios are most often compared between similar companies in the same sector, since a "normal" P/E varies enormously between industries with different growth and risk profiles.
Checking a headline figure from a broker report
Recalculating P/E directly from the reported share price and EPS is a quick way to confirm a figure quoted elsewhere, or to see what P/E results from a different EPS estimate.
Understanding how how to calculate P/E fits with earnings yield
Some investors find it more intuitive to think in terms of earnings yield, the percentage return on the price paid, rather than a multiple; converting between the two just needs a reciprocal.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How the P/E ratio changes with earnings per share
A fixed $150 share price, across a range of EPS figures.
| Earnings per share | P/E ratio | Earnings yield |
|---|---|---|
| $2.00 | 75.00× | 1.33% |
| $3.00 | 50.00× | 2.00% |
| $5.00 | 30.00× | 3.33% |
| $6.00 | 25.00× | 4.00% |
| $10.00 | 15.00× | 6.67% |
| $15.00 | 10.00× | 10.0% |
How the P/E ratio changes with share price
A fixed $6 EPS, across a range of share prices.
| Share price | P/E ratio | Earnings yield |
|---|---|---|
| $60.00 | 10.00× | 10.0% |
| $90.00 | 15.00× | 6.67% |
| $120.00 | 20.00× | 5.00% |
| $150.00 | 25.00× | 4.00% |
| $210.00 | 35.00× | 2.86% |
| $300.00 | 50.00× | 2.00% |
Questions
How do you calculate a P/E ratio?
Divide the current share price by earnings per share (EPS). For example, a $150 share price with $6 of EPS gives a P/E ratio of 25.
What does a high or low P/E conventionally suggest?
A higher P/E is conventionally read as the market pricing in stronger future earnings growth, or paying a premium for perceived quality or safety; a lower P/E is conventionally read as the market expecting slower growth, or pricing in more risk. Neither reading is guaranteed correct for any individual company, and this is general context only, not investment advice.
What is the difference between trailing and forward P/E?
Trailing P/E uses EPS from the past 12 reported months, an actual figure. Forward P/E uses a forecast of future EPS, which is an estimate and can turn out to be wrong, so the two can give noticeably different results for the same share price.
Can a P/E ratio be negative or meaningless?
Yes. If a company reports a loss, EPS is negative and the resulting P/E ratio is negative too, which is usually treated as not meaningful rather than compared directly against a positive P/E from a profitable company.
For a different way of framing what a company is worth, see the dividend discount model calculator. For a risk-adjusted return figure rather than a valuation multiple, see the Sharpe ratio calculator.