Price-to-Earnings (P/E) Ratio Calculator
The price-to-earnings ratio is the most widely used stock valuation metric. It compares a company's share price to its earnings per share, expressing how much the market is willing to pay per dollar of earnings. A high P/E suggests investors expect strong future growth; a low P/E may indicate undervaluation or slower expected growth. This calculator computes the P/E ratio and the implied earnings yield (the inverse of P/E), which is comparable to bond yields and useful for relative value analysis. Enter the current share price and either trailing (actual) or forward (estimated) earnings per share.
P/E ratio formula
P/E ratio = share price / earnings per share
Earnings yield = earnings per share / share price = 1 / P/E ratio
Earnings yield is the reciprocal of the P/E ratio and expresses EPS as a percentage of share price. It can be compared directly to bond yields to assess relative value between stocks and fixed income.
Interpreting the P/E ratio
- P/E below 15: may indicate undervaluation relative to historical norms, or slow growth expectations.
- P/E of 15 to 25: broadly in line with long-run market averages.
- P/E above 30: investors expect above-average growth; the stock is priced for high future earnings.
- The cyclically adjusted P/E (CAPE or Shiller P/E) uses 10-year average earnings to smooth business cycle effects.
- P/E ratios should be compared within the same industry; technology companies historically command higher P/Es than utilities.
Frequently asked questions
What is the P/E ratio?
The price-to-earnings (P/E) ratio is the share price divided by earnings per share (EPS). It shows how much investors are willing to pay for each dollar of earnings. A P/E of 20 means investors pay $20 for every $1 of annual earnings.
What is a good P/E ratio?
There is no universal good P/E ratio. The historical average P/E for the S&P 500 is around 15 to 20. Growth companies often trade at P/E ratios well above 30. Value stocks may trade at single-digit P/Es. Context matters: compare P/E within the same industry and to the company's own historical range.
What is trailing vs forward P/E?
Trailing P/E uses the most recent 12 months of actual earnings. Forward P/E uses projected earnings for the next 12 months. Forward P/E is more forward-looking but depends on analyst estimates that may be wrong. Both are commonly reported in financial filings.
What does a negative P/E mean?
A negative P/E occurs when a company has negative earnings (a net loss). In this case, P/E is not meaningful as a valuation metric. Investors in loss-making companies often use other metrics such as price-to-sales or enterprise value to EBITDA.
Where do I find EPS?
Earnings per share is reported in a company's income statement in its 10-K (annual) and 10-Q (quarterly) filings with the SEC, available via EDGAR. Both basic and diluted EPS must be disclosed. Diluted EPS, which accounts for options and convertibles, is the most conservative measure.
Official sources
- SEC EDGAR: Earnings per Share in 10-K Filings.
- Federal Reserve FRED: S&P 500 Index Data.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.