Investing
Price to earnings ratio
The multiple the market pays for each unit of annual profit. Meaningless when earnings are negative.
The Formula
P/E = share price / earnings per share
The multiple the market pays for each unit of annual profit. Meaningless when earnings are negative.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| P/E | Price to earnings | multiple | Market price per unit of annual profit. |
| P | Share price | currency | Current market price of one share. |
| EPS | Earnings per share | currency | Profit attributable to each share. |
What Each Symbol Means
P/Emultiple
Price to earnings
Market price per unit of annual profit.
Pcurrency
Share price
Current market price of one share.
EPScurrency
Earnings per share
Profit attributable to each share.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate a price to earnings ratio page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate A Price To Earnings Ratio, filed under Finance. Every number the guide produces comes from substituting into this one line.