Price-to-Earnings (P/E) Calculator
Value a stock with its price-to-earnings ratio in seconds.
Result
How it is calculated
The tool divides the share price by earnings per share: P/E = price ÷ EPS. It also reports the earnings yield, the same relationship turned upside down: earnings yield = EPS ÷ price × 100, shown as a percent. Price and EPS must be in the same currency and per one share. The tool does not know whether your EPS is trailing (the last twelve months reported) or forward (an analyst estimate); it simply divides by the number you give, so the label is up to you. Both price and EPS have to be above zero: a company with zero or negative earnings has no meaningful P/E, and a zero or negative price is not a real quote, so in those cases no result is shown. Very small earnings give a very large P/E, for example EPS 0.01 at a price of 150 gives 15,000. The tool does not say whether a P/E is cheap or expensive, since that depends on sector and growth.
Worked example
A share trades at 150 and the company earned 6 per share over the last twelve months. Step 1: P/E = 150 ÷ 6 = 25.00. Step 2: earnings yield = 6 ÷ 150 × 100 = 4.00%. The EPS is echoed back as $6.00. Read it as paying 25 times annual earnings, or earning 4% of the price each year at the current profit level, before any growth or dividends are considered.
Common mistakes
- Using the company's total net income instead of earnings per share. Net income divided by the number of shares gives EPS; entering the total gives a meaningless ratio.
- Mixing EPS and price from different periods or currencies, for example a price in dollars with EPS reported in another currency.
- Comparing a trailing P/E for one company with a forward P/E for another. Check both figures were built the same way.
- Typing a loss as a negative EPS and expecting a ratio. With zero or negative earnings the tool gives no result because the P/E is not meaningful.
- Treating a low P/E as proof of a bargain. The ratio ignores debt, growth and one-off gains in the earnings figure.
About this calculator
The price-to-earnings ratio (P/E) divides a company's share price by its earnings per share, showing how many years of current earnings it would take to pay back the purchase price — or, viewed differently, how much investors are willing to pay today for each unit of the company's profit. A high P/E generally signals that the market expects strong future growth, while a low P/E can indicate either an undervalued stock or genuine concerns about the company's prospects.
Analysts distinguish between trailing P/E, based on the last twelve months of actual reported earnings, and forward P/E, based on analysts' earnings estimates for the coming year — the two can diverge significantly for companies expected to grow or shrink quickly. P/E is most useful when comparing companies within the same industry, since typical multiples vary widely between sectors like utilities and high-growth technology. This calculator takes the share price and earnings per share to compute the P/E ratio and its inverse, the earnings yield.
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