P/E Ratio Calculator

Calculate Price-to-Earnings ratio for stock analysis. Compare valuations and evaluate if a stock is overvalued or undervalued.

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Quick Facts

S&P 500 Average P/E
~25-30
Historical range
Value Stock Range
Below 15
May indicate undervaluation
Growth Stock Range
25+
Reflects growth expectations
Shiller P/E (CAPE)
~30-35
10-year inflation-adjusted

Your Results

Calculated
P/E Ratio
0
Price / EPS
Earnings Per Share
$0
Annual EPS
Earnings Yield
0%
Inverse of P/E

Valuation Analysis

Key Takeaways

  • P/E Ratio = Stock Price / Earnings Per Share (EPS)
  • Higher P/E may indicate growth expectations or overvaluation
  • Lower P/E may signal value opportunity or company concerns
  • Always compare P/E within the same industry sector
  • Negative earnings make P/E meaningless - use other metrics

What Is the P/E Ratio?

The Price-to-Earnings (P/E) ratio is one of the most widely used stock valuation metrics in fundamental analysis. It compares a company's stock price to its earnings per share, helping investors understand how much they're paying for each dollar of earnings.

Think of it as a "payback period" - if a company has a P/E of 20, you're paying 20 times its annual earnings. At that rate, it would take 20 years of current earnings to "pay back" your investment (ignoring growth).

P/E Ratio = Stock Price / Earnings Per Share (EPS)
Stock Price = Current market price per share
EPS = Net Income / Shares Outstanding

Types of P/E Ratios

Trailing P/E (TTM)

Uses actual earnings from the past 12 months. This is the most common P/E calculation because it's based on reported, verified earnings. It's backward-looking but provides concrete data.

Forward P/E

Uses projected earnings for the next 12 months based on analyst estimates. Useful for evaluating growth expectations, but depends on the accuracy of predictions. Forward P/E is typically lower than trailing P/E for growing companies.

Shiller P/E (CAPE)

The Cyclically Adjusted P/E uses average inflation-adjusted earnings over 10 years. This smooths out business cycle fluctuations and is often used for market-wide valuation analysis rather than individual stocks.

How to Interpret P/E Ratios

P/E Range Interpretation Typical Companies
>30 High growth expectations or potentially overvalued Tech growth stocks, high-growth sectors
15-30 Market average - reasonable valuation Established companies, market leaders
<15 Potentially undervalued or concerns about growth Value stocks, mature industries, cyclical companies
Negative Company has negative earnings (losses) Startups, turnaround situations

Important Considerations

  • Compare within industries: A P/E of 30 might be cheap for a fast-growing tech stock but expensive for a utility company
  • Consider growth rate: Use the PEG ratio (P/E / Growth Rate) for growth-adjusted comparison
  • Watch for one-time events: Extraordinary gains or losses can distort EPS temporarily
  • Quality of earnings: Recurring revenue is more valuable than one-time gains
  • Cyclical businesses: P/E may look cheap at cycle peaks when earnings are high

Earnings Yield: The P/E Inverse

Earnings yield (EPS / Price) is simply the inverse of P/E ratio, expressed as a percentage. A P/E of 20 equals a 5% earnings yield. This makes it easier to compare stock returns to bond yields or other investments.