P/E Ratio Calculator
Compute trailing and forward price-to-earnings, earnings yield, the PEG ratio, and a fair-value share price
Stock Inputs
Current market price of one share
Earnings per share over the last 12 months (enter a negative value for a loss)
Estimated earnings per share for the next 12 months, for the forward P/E
Annual earnings growth used to compute the PEG ratio
A multiple you consider fair — used to estimate a fair-value share price
Valuation Results
Trailing P/E Ratio
25.00
Growth premium — relatively expensive
Forward P/E
20.00
Earnings Yield
4.00%
PEG Ratio
2.08
Fair Value Price
$120.00
PEG Interpretation
PEG above 1 — expensive relative to growth.
vs. Current Price at Target P/E
-20.00%
The stock trades above your fair-value estimate (potentially overvalued).
Earnings yield is the inverse of the P/E ratio ($EPS ÷ price). It lets you compare a stock's return against bond yields on the same percentage basis.
Complete Guide to the P/E Ratio
What is the P/E Ratio?
The price-to-earnings (P/E) ratio tells you how many dollars investors are willing to pay today for one dollar of a company's annual earnings. It is the single most quoted valuation metric in equity markets because it compresses price and profitability into one number you can compare across stocks, sectors, and time.
A high P/E is not automatically "expensive" and a low P/E is not automatically "cheap" — the multiple reflects expected growth, risk, and the quality of a company's earnings. To judge whether a stock is fairly priced, read the P/E alongside its growth (the PEG ratio) and cash-generation measures such as the DCF Calculator or the Dividend Yield Calculator for income-focused stocks.
Formula
Price-to-Earnings Ratio:
P/E = Share Price / Earnings Per Share (EPS)
Trailing P/E uses last-12-months EPS; forward P/E uses estimated next-12-months EPS
Related Measures:
Earnings Yield = EPS / Price x 100
PEG Ratio = P/E / Expected EPS Growth Rate (%)
Fair Value Price = Target P/E x EPS
Benefits
Instant comparability
One number lets you line up companies of very different sizes on the same price-per-earnings basis.
Growth context via PEG
Dividing the P/E by growth converts a raw multiple into a growth-adjusted signal of value.
Bond-comparable yield
The earnings yield expresses the P/E as a percentage return you can weigh against fixed-income alternatives.
Fair-value anchor
Applying a target multiple to EPS produces a concrete fair-value price and an implied upside or downside.
Tips
Tip 1: Compare a stock's P/E to its own history and to direct competitors in the same industry, not to the market as a whole — normal multiples differ widely by sector.
Tip 2: Use forward P/E for fast-growing companies where trailing earnings understate the business, but remember forward figures rest on estimates that can be revised.
Tip 3: Check whether earnings are distorted by one-time items; a temporarily depressed profit can make a P/E look alarmingly high even for a healthy company.
Common Mistakes
Comparing across industries
A slow-growth utility and a high-growth software firm naturally trade at different multiples; a raw P/E comparison between them is meaningless.
Ignoring negative or one-off earnings
When EPS is zero or negative the P/E is not meaningful, and a profit inflated by a one-time gain makes the multiple look cheaper than the underlying business really is.
Using P/E in isolation
The ratio says nothing about debt, cash flow, or growth. Cross-check it with tools like the ROI Calculator and Stock Return Calculator before drawing conclusions.
Related tools
Browse allDCF Calculator
Value a company with a discounted cash flow model. Project free cash flows, discount at your WACC, and estimate enterprise value, equity value, and fair value per share.
OpenDividend Yield Calculator
Calculate dividend yield and annual income for any stock. Fetch live prices, calculate yield on cost, and see your monthly/yearly payout breakdown.
OpenROI Calculator
Calculate return on investment, net profit, annualized ROI, and investment multiple for any asset. Include additional costs, income, and holding period.
OpenStock Return Calculator
Calculate total return, CAGR, and dividend income for any stock. Live prices via AlphaVantage, search from MoneyFlock's stock database.
OpenFrequently Asked Questions
What is the P/E (price-to-earnings) ratio?
The price-to-earnings ratio measures how much investors pay for each unit of a company's earnings. It equals the share price divided by earnings per share (EPS), so a P/E of 25 means the market is paying 25 times the last year's per-share profit. It is the most widely used shorthand for how cheap or expensive a stock is relative to what it earns.
How is the P/E ratio calculated?
P/E = Share Price / Earnings Per Share. For example, a stock trading at $150 with trailing EPS of $6 has a P/E of 150 / 6 = 25. You can also compute it at the company level as Market Capitalization / Net Income, which gives the same number. When EPS is zero or negative the ratio is not meaningful.
What is the difference between trailing and forward P/E?
Trailing P/E uses the earnings a company has already reported over the last 12 months, so it is factual but backward-looking. Forward P/E uses analyst estimates of the next 12 months' EPS, so it reflects expected growth but depends on forecasts that can be wrong. A forward P/E lower than the trailing P/E signals that earnings are expected to grow.
What are the PEG ratio and earnings yield, and why do they matter?
The PEG ratio divides the P/E by the expected earnings growth rate (P/E ÷ growth %); a PEG under 1 suggests the stock is cheap relative to its growth, while above 1 suggests it is expensive. Earnings yield is the inverse of the P/E (EPS ÷ price), letting you compare a stock's return directly against bond yields on the same percentage basis.
What are common mistakes when using the P/E ratio?
The biggest errors are comparing P/E ratios across different industries (a utility and a software firm should not trade at the same multiple), trusting a P/E built on one-off or negative earnings, and ignoring debt — two firms with the same P/E can carry very different balance-sheet risk. Pair the P/E with cash-flow and growth measures rather than using it alone.
Worked example with numbers?
A stock priced at $150 with trailing EPS of $6 has a trailing P/E of 25.00 and an earnings yield of 4.00%. If forward EPS is $7.50 the forward P/E is 20.00, and with 12% expected growth the PEG is 25 / 12 = 2.08. Applying a target P/E of 20 to the $6 EPS gives a fair value of $120, which is 20% below the current $150 price.