P/E ratio
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Calculator
P/E ratio calculator
Enter the share price and either one annual EPS figure or four quarterly figures. The calculator returns the P/E, the earnings yield, and the working.
Earnings yield
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EPS used
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The working
What the P/E ratio tells you
The P/E ratio is the share price divided by earnings per share. A P/E of 12 means buyers are paying $12 for each dollar of annual profit. Flip it and you get the earnings yield, 1 divided by 12, about 8.3%, which is easier to set beside a bond yield or a savings rate.
On its own the number says little. A utility growing slowly and a software company growing fast can both be fairly priced at very different multiples, which is why the ratio is most useful next to close peers and the company's own history.
Where the inputs come from
Trailing EPS is the sum of the last four reported quarters. It sits in the income statement of each 10-Q and 10-K, and quote pages show it as EPS (TTM). Forward EPS is a consensus of analyst estimates. Check whether a figure is GAAP or adjusted before you use it: an adjusted number that leaves out recurring costs flatters the P/E, sometimes by a lot. The earnings per share page covers basic, diluted and adjusted EPS in detail, and the P/E ratio page works both versions through by hand.
What the ratio leaves out
Debt, mostly. Two companies with the same price and the same earnings have the same P/E even if one of them owes several years of profit to its lenders. EV/EBITDA counts the debt. One-off gains and cyclical peaks also make a P/E look cheap right before earnings fall, which is the trap covered in a low P/E tells you where to start digging.
Related questions
What if earnings per share is negative?
A P/E on negative earnings has no useful meaning, so the calculator shows it as not meaningful. Quote pages usually leave the field blank or print NM. Price-to-sales or EV/Sales are the usual stand-ins until the company earns a profit.
Should I use trailing or forward EPS?
Trailing EPS is what the company actually reported over the last four quarters. Forward EPS is an estimate of the next twelve months or fiscal year. Use trailing to see what you pay for results already in, and forward to see what the market is paying for expected results. Comparing the two tells you how much growth the estimate assumes.