P/E Ratio Calculator

How to calculate Price-to-Earnings (P/E) calculator?

The P/E ratio compares a company's market price per share to its earnings per share to indicate how the market values each dollar of earnings.

Use the formula P/E = Price per Share ÷ Earnings per Share (EPS) to compute the ratio.

Using the Price-to-Earnings (P/E) calculator calculator: an example

Example values: Current stock price = $120; EPS = $4.00.

Step-by-step calculation:

1. Start with the inputs: Price = $120, EPS = $4.00.
2. Apply the formula: 120 ÷ 4.00 = 30.
3. Interpret the result: P/E = 30 means investors pay $30 for each $1 of reported earnings.
4. Compare to peers or sector average to assess whether the stock is relatively cheap or expensive.

Frequently Asked Questions

What does a high P/E ratio mean?

A higher P/E often signals that the market expects stronger future growth, but it can also indicate overvaluation; always compare within the same industry.

Can P/E be negative?

Yes. If EPS is negative, the P/E ratio is not meaningful; use other metrics like price-to-sales or enterprise value ratios for unprofitable companies.

Should I use trailing or forward EPS?

Trailing P/E uses historical EPS (last 12 months), while forward P/E uses estimated future EPS; choose trailing for verified results and forward for growth expectations.