P/E Ratio Calculator
Use this PE ratio calculator to divide share price by earnings per share and see the price-to-earnings multiple and the earnings yield.
What it does
The P/E Ratio Calculator divides a share price by earnings per share to show how much investors pay for each unit of a company's profit. It also returns the earnings yield, the same relationship expressed as a percentage.
Data sources & parameters
This calculator uses standard financial formulas and runs entirely in your browser. It needs no external rate data — your result is computed only from the values you enter above.
We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.
The formula
P/E = Share price ÷ EPS; Earnings yield = EPS ÷ Share price × 100
How it works
Enter the current share price and the earnings per share (EPS). The tool divides price by EPS to get the price-to-earnings multiple, then inverts it to show the earnings yield, so you can read valuation as a multiple or as a return.
Where it is used
- Comparing how expensive two stocks are relative to their profits
- Gauging whether a share looks cheap or richly valued versus its sector
- Translating a P/E multiple into an earnings yield for comparison with bond rates
Worked example
A share trades at $100.00 with earnings per share of $5.00. The P/E ratio is …, meaning investors pay that many times annual profit, and the earnings yield is ….
What the P/E ratio calculator does
The P/E ratio calculator shows how expensive a share is relative to the profit it generates. Dividing the current share price by earnings per share gives the price-to-earnings multiple, the most widely quoted valuation figure in the stock market. The tool also shows the earnings yield, the same relationship expressed as a percentage return.
From two numbers you see how many years of current earnings you are paying for and what annual return those earnings represent against the price, which lets you compare companies or check whether a share looks cheap or richly valued.
How the price-to-earnings ratio works
If a company earns five units of profit for each share and the share trades at one hundred, investors are paying twenty times the annual earnings: a P/E ratio of twenty.
A higher multiple means the market will pay more for each unit of current profit, usually because it expects profits to grow or sees the business as safe and predictable. A lower multiple can signal a bargain, slow growth, or perceived risk. The ratio shows the price being charged, not which explanation applies.
Because it is a ratio, the P/E removes the effect of share count and absolute price. A share priced at ten and one priced at one thousand can carry the same P/E if their earnings are proportional, so the multiple is comparable across companies of very different sizes.
The earnings yield
The earnings yield divides earnings by price and expresses the result as a percentage. A P/E of twenty becomes an earnings yield of five percent, and a P/E of ten becomes ten percent.
Bond investors think in percentage yields, and the earnings yield lets you compare the return implied by a stock's profits with the interest on bonds or cash. When earnings yields are far above bond rates, equities may look attractive relative to fixed income; when they are compressed, shares are priced for growth more than immediate income.
The formula
- P/E ratio = Share price ÷ Earnings per share
- Earnings yield = Earnings per share ÷ Share price × 100
If earnings per share are nil, the P/E is reported as zero, because the multiple would otherwise be undefined.
A worked example
A share trading at 100 with earnings per share of 5 has a P/E ratio of 20: the market pays twenty times the company's annual per-share profit. Inverted, 5 divided by 100 is 0.05, an earnings yield of 5 percent.
A second company with a share price of 150 and earnings per share of 6 has a P/E of 25 and an earnings yield of 4 percent. It is more expensive relative to its earnings, and an investor would want to know whether faster expected growth or higher quality justifies the higher multiple.
When the P/E ratio is most useful
A single P/E means little on its own. Compare a company with its own history, with direct competitors, and with the average for its sector. A retailer on a multiple well below its peers may be cheap, or it may be struggling, and the ratio prompts the question.
When multiples across a sector expand, the market is growing more optimistic about future profits; when they contract, expectations are cooling. Watching a company's P/E alongside its earnings shows whether a rising share price reflects profit growth or a willingness to pay more for the same profit.
Limitations
The P/E relies on an earnings figure that one-off gains, accounting choices, or unusually good or bad years can distort. A company with temporarily depressed profits can show a misleadingly high multiple, and one enjoying a peak year can look deceptively cheap.
The ratio says nothing about debt: two companies with identical P/E ratios can carry very different levels of borrowing and risk. For businesses not yet profitable, the P/E does not work at all, which is why growth investors often use other measures. Pair it with the PEG ratio and earnings per share for a fuller view.
About This Pe Ratio Calculator
Use this pe ratio calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.
Frequently asked questions
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