A Price To Earnings Ratio Calculator
The price to earnings ratio is the market's asking price for each unit of profit, and it is the quickest way to put two share prices on the same footing.
Price to earnings ratio
16
- Earnings yield
- 6.25%
- Share price
- $80.00
- Earnings per share
- $5.00
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
The formula this calculator uses
P/E = share price / earnings per share
- P/E
- Price to earnings ratio, a multiple
- P
- Current share price
- EPS
- Earnings per share, usually trailing twelve months
How to check the result by hand
- 1
Find the current share price
The market price per share, in the same currency as the earnings. Prices move constantly, so the ratio is only valid at the moment it is calculated.
- 2
Work out or look up earnings per share
Net income divided by shares outstanding. Decide whether you are using trailing reported earnings or a forward forecast, and say which.
- 3
Divide price by earnings per share
Eighty divided by five is sixteen. The result is a multiple with no units, and it is the number of years of current profit the price represents.
- 4
Invert it for the earnings yield
One divided by sixteen is 6.25 percent. This form can be compared directly with bond yields and deposit rates.
- 5
Compare only within the industry and check the balance sheet
A ratio in isolation says little. Compare with sector peers and look at debt, since the multiple ignores how the earnings were funded.
For worked examples, common mistakes and the limits of this formula, read the full How To Calculate A Price To Earnings Ratio page.