Price-to-Earnings (P/E) Calculator

How it is calculated

The tool divides the share price by earnings per share: P/E = price ÷ EPS. It also reports the earnings yield, the same relationship turned upside down: earnings yield = EPS ÷ price × 100, shown as a percent. Price and EPS must be in the same currency and per one share. The tool does not know whether your EPS is trailing (the last twelve months reported) or forward (an analyst estimate); it simply divides by the number you give, so the label is up to you. Both price and EPS have to be above zero: a company with zero or negative earnings has no meaningful P/E, and a zero or negative price is not a real quote, so in those cases no result is shown. Very small earnings give a very large P/E, for example EPS 0.01 at a price of 150 gives 15,000. The tool does not say whether a P/E is cheap or expensive, since that depends on sector and growth.

Common mistakes

• Using the company's total net income instead of earnings per share. Net income divided by the number of shares gives EPS; entering the total gives a meaningless ratio.
• Mixing EPS and price from different periods or currencies, for example a price in dollars with EPS reported in another currency.
• Comparing a trailing P/E for one company with a forward P/E for another. Check both figures were built the same way.
• Typing a loss as a negative EPS and expecting a ratio. With zero or negative earnings the tool gives no result because the P/E is not meaningful.
• Treating a low P/E as proof of a bargain. The ratio ignores debt, growth and one-off gains in the earnings figure.