What this calculator does
Valuation multiples compare what you pay against what you get. P/E measures price against earnings, P/B against balance sheet value, and PEG adjusts the P/E for how fast earnings are expected to grow.
PEG is the one that adds something. A P/E of 20 looks expensive against a P/E of 10 until you know the first company is growing at 12 per cent a year, at which point a PEG of 1.67 against 0.83 tells a more balanced story.
The formula
P/E divides share price by earnings per share, P/B divides it by book value per share, and PEG divides the P/E by the expected annual earnings growth rate expressed as a plain number.
| Term | Meaning |
|---|---|
| P/E ratio | Price divided by earnings per share. How many years of current earnings the price represents. |
| P/B ratio | Price divided by book value per share, comparing market value against accounting value. |
| PEG ratio | P/E divided by growth rate. Below 1 is traditionally considered cheap relative to growth. |
The inputs explained
| Field | What to enter |
|---|---|
| Share price ($) | The current share price. |
| Earnings per share ($) | Earnings per share over the last twelve months, or forecast if using a forward multiple. |
| Book value per share ($) | Book value per share, being shareholders' equity divided by shares outstanding. |
| Expected annual EPS growth (%) | Expected annual earnings growth, as a percentage. |
When to use it
Screening for value
Multiples are the standard first filter for narrowing a list of candidates.
Comparing within a sector
Multiples only mean something against peers, since every industry trades in its own range.
Adjusting for growth
PEG prevents a fast-growing company being dismissed purely for having a high P/E.
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 do the multiples change with the share price?
The same company at three share prices.
Questions
What is a good P/E ratio?
There is no universal answer. Utilities commonly trade in the low teens, while fast-growing technology companies routinely exceed 30. A P/E only carries meaning when compared with the company's own history and its sector peers.
What does a PEG below 1 mean?
That the P/E is lower than the growth rate, which Peter Lynch popularised as a rough sign of value. It is a heuristic rather than a rule, and it depends entirely on the growth forecast being realistic.
When is P/B useful?
Mainly for banks, insurers and asset-heavy businesses where the balance sheet genuinely reflects value. For service and software companies, whose value lies in things the accounts do not capture, it says very little.
Can a P/E ratio be negative?
Arithmetically yes, when earnings are negative, but the result is meaningless. Loss-making companies are normally valued on revenue multiples or on forecast future earnings instead.
For a measure that includes debt, see the enterprise value calculator. For a valuation rule of thumb from the same tradition, see the Graham number calculator.