How to use the p/e ratio calculator
- Enter the share price.
- Choose whether you know earnings per share or net income and shares. For net income, also enter the number of shares outstanding.
- Open More options to enter a target multiple and see the price it implies.
- Read the P/E ratio, the earnings yield and how the target price compares with today's price.
Formula
EPS = net income / shares outstanding
P/E ratio = share price / EPS
Earnings yield = EPS / share price
Price at a target multiple = EPS x multiple
The earnings yield is the inverse of the P/E ratio shown as a percent. A P/E is only meaningful when earnings are positive, so the page asks for a different measure when they are zero or negative.
A $50 share earning $2.50
The P/E ratio is 50 / 2.50 = 20.00, meaning the price is 20 times one year of earnings. The earnings yield is 2.50 / 50 = 5.00%. If you know only the company's net income of $500,000,000 and 200,000,000 shares, EPS is $2.50 and the answer is the same.
A 15x multiple applied to the same earnings implies a price of 2.50 x 15 = $37.50, which is 25% below $50. A $100 share earning $3 has a P/E of 33.33.
What the ratio can and cannot say
A P/E ratio compares the price with one measure of earnings, either from the past twelve months (trailing) or from a forecast. A higher ratio can mean the market expects faster growth, or that the shares are expensive, or that earnings are temporarily low. Comparing P/E ratios is most useful within one industry and over time for one company.
Beyond P/E
Earnings can be one-off, can be shaped by accounting choices and say nothing about debt or cash flow. A negative or very small EPS makes the ratio meaningless or extreme. Look at several measures before drawing conclusions, and remember this is a learning tool and not investment advice.
For a dividend-based view use the Dividend Discount Model Calculator, to see your gain or loss use the Stock Profit Calculator and to compare returns use the ROI Calculator.
Assumptions and limits
- Earnings per share and price are for the same share class and period.
- The target multiple is an example you choose, not a standard or a forecast.
- Negative or zero earnings are not accepted for the ratio.
- Nothing is uploaded. Calculations run in your browser.
Frequently asked questions
What is a good P/E ratio?
There is no single good value. It depends on growth, risk, interest rates and the industry. Compare a company with similar ones and with its own history instead of with a fixed number.
What is the earnings yield?
It is earnings per share divided by price, shown as a percent. It is the inverse of the P/E, so a P/E of 20 is a 5% earnings yield. It lets you compare earnings with interest rates on other investments.
Why does the page refuse a negative EPS?
Dividing a price by negative earnings gives a number with no useful meaning. When a company loses money, compare its price with sales, book value or cash flow instead.
Which earnings should I use?
Many people use the last twelve months of earnings per share, which is the trailing P/E. A forward P/E uses expected earnings, which are estimates. Use the same measure when you compare companies.