Price-to-Earnings (P/E) Ratio Calculator
Calculate the price-to-earnings (P/E) ratio to assess a company’s stock valuation relative to its earnings. Choose between trailing or forward EPS and optionally compute the PEG ratio for growth-adjusted valuation.
Result
Detailed Steps
Visual Representation
Formula
Price-to-Earnings (P/E) Ratio Definition
The P/E ratio is calculated by dividing the share price by the earnings per share (EPS):
Price/Earnings-to-Growth (PEG) Ratio Definition
The PEG ratio is calculated by dividing the P/E ratio by the annual earnings growth rate (in percentage):
Interpretation
- P/E < 20: Low – The stock may be undervalued or have lower growth prospects.
- P/E 20–25: Average – The stock is aligned with the market average.
- P/E > 25: High – The stock may be overvalued or have high growth expectations.
- PEG ~1: Indicates fair valuation relative to growth; <1 suggests undervaluation, >1 suggests overvaluation.
- Trailing P/E: Uses historical EPS, more reliable but backward-looking.
- Forward P/E: Uses projected EPS, forward-looking but speculative.
How to Use the Price-to-Earnings (P/E) Ratio Calculator
- Enter the current share price of the stock (e.g., $75).
- Enter the earnings per share (EPS) (e.g., $3).
- Select whether EPS is trailing (past) or forward (projected).
- (Optional) Check the box to include the PEG ratio and enter the annual earnings growth rate (e.g., 10%).
- Click “Calculate” to view the P/E ratio, valuation status, and optional PEG ratio.
- Switch between Standard, Step-by-Step, or Chart views for detailed insights.
Frequently Asked Questions (FAQs)
What is the price-to-earnings (P/E) ratio?
The P/E ratio is a financial metric that measures a company’s stock valuation by dividing its share price by its earnings per share (EPS). It shows how much investors pay per dollar of earnings.
How to calculate price-earnings ratio?
To calculate the P/E ratio:
- Obtain the current share price (e.g., $75).
- Obtain the EPS, either trailing or forward (e.g., $3).
- Divide: P/E Ratio = Share Price ÷ EPS.
Example: P/E = 75 ÷ 3 = 25.
What is the P/E ratio formula?
The formula is:
What is the PEG ratio, and how is it calculated?
The PEG ratio adjusts P/E for growth:
Example: P/E = 25, Growth Rate = 10% → PEG = 25 ÷ 10 = 2.5.
What is a good P/E ratio?
It depends on the market and industry:
- <20: Low, may indicate undervaluation.
- 20–25: Average, market-aligned.
- >25: High, may indicate overvaluation or growth expectations.
What is the difference between trailing and forward P/E?
Trailing P/E uses EPS from the past 12 months (actual data). Forward P/E uses estimated EPS for the next 12 months (projections).
Why is the P/E ratio important?
It helps investors assess stock valuation, compare companies, and gauge market expectations. PEG adds growth context.