P/E Ratio Calculator
Calculate a stock’s price-to-earnings ratio from its share price and earnings per share. Use the result to compare how much investors pay for a dollar of earnings, alongside growth, sector and business risks; the ratio alone does not establish whether a stock is fairly valued.
A stock trading at $150 with EPS of $6.00 has a P/E ratio of 25. If the S&P 500 average P/E is about 20–22, this stock trades at a slight premium to the market.
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Understanding P/E Ratios
Key concepts for stock valuation using price-to-earnings
What does P/E ratio tell you?
The P/E ratio tells you how much investors are willing to pay for each dollar of earnings. A P/E of 25 means investors pay $25 for every $1 of annual earnings. Higher P/E ratios generally indicate that investors expect higher future growth, while lower P/E ratios may suggest the stock is undervalued or that the company faces challenges.
The earnings yield (the inverse of P/E) lets you compare stock returns to bond yields directly. A stock with a P/E of 20 has a 5% earnings yield, making it easy to weigh against a Treasury bond paying 4%.
What is a good P/E ratio?
There is no single "good" P/E ratio. It depends on the industry, growth rate, and market conditions. The S&P 500 historically averages a P/E of 15–20, though it often trades higher. Tech companies routinely have P/E ratios above 30 because of their growth potential, while utilities and banks often trade below 15.
The PEG ratio (P/E divided by growth rate) adjusts for growth. A PEG below 1.0 suggests the stock may be undervalued relative to its growth, while a PEG above 1.0 suggests a premium. Always compare within the same sector for the most meaningful analysis.
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For informational and educational purposes only, not investment advice.