P/E Ratio Calculator — Price-to-Earnings

What Is the P/E Ratio?

The Price-to-Earnings (P/E) ratio is the most widely used metric for evaluating whether a stock is cheap or expensive.

It answers a simple question: How many dollars are investors willing to pay for every $1 of a company’s earnings?

Think of it like buying a rental property. If a building costs $200,000 and generates $20,000 in annual profit, you are paying 10 times its earnings — a “P/E” of 10. You would get your investment back in 10 years from profits alone.

The Formula

P/E = Stock Price / Earnings Per Share (EPS)

Where:

• Stock Price = Current market price of one share
• EPS = Earnings Per Share = Company’s total net income divided by the number of shares outstanding

For example: if a stock trades at $150 and the company earns $10 per share, the P/E is 150 / 10 = 15.

Types of P/E Ratios

This calculator works for both — just enter the appropriate EPS.

How to Interpret the P/E Ratio

A high P/E (e.g., 30+) means investors expect strong future growth. They are willing to pay more today for each dollar of current earnings because they believe earnings will grow significantly.

A low P/E (e.g., under 15) means the stock is priced conservatively. Either investors expect slow growth, or the stock might be undervalued.

Important: A high P/E is not automatically “bad” and a low P/E is not automatically “good.” The P/E only makes sense when compared to similar companies in the same industry.

P/E Ranges by Industry (Approximate Averages)

Worked Example

Stock price: $175 Earnings per share (trailing 12 months): $7.00

P/E = $175 / $7.00 = 25.0

This means investors are paying $25 for every $1 of earnings. If this is a technology stock, a P/E of 25 is fairly normal. If it is a utility stock, a P/E of 25 might mean it is expensive.

The Earnings Yield (Inverse P/E)

Flipping the P/E ratio upside down gives you the earnings yield:

Earnings Yield = EPS / Stock Price = 1 / P/E

A P/E of 25 gives an earnings yield of 1/25 = 4%. This is useful for comparing stocks to bonds. If the 10-year Treasury yields 4.5%, a stock with a 4% earnings yield may not be attractive enough on a relative basis.

What Can Make P/E Misleading

• Negative earnings: If a company loses money, the P/E is negative or meaningless. This calculator will alert you if EPS is zero or negative.
• One-time items: A big legal settlement or asset sale can temporarily spike EPS up or down, distorting the P/E.
• Cyclical companies: During peak earnings, P/E looks low. During troughs, it looks high. Use averaged or normalized earnings for cyclical businesses.
• Different accounting standards: Companies in different countries may calculate earnings differently.
• Stock buybacks: A company buying back shares reduces share count, which increases EPS, making P/E look lower even if total profits have not changed.

Where to Find EPS

• Yahoo Finance, Google Finance, or any stock screener shows EPS for every public company.
• Look for “EPS (TTM)” for trailing earnings, or “Forward EPS” for analyst estimates.
• EPS is also found on the company’s income statement filed with the SEC (in the US).