P/E Ratio: What It Means & How to Calculate It

The P/E ratio compares a company’s share price with its earnings per share. It tells you how much investors are paying for each $1 of the company’s profit, and is the most widely quoted stock valuation measure.

How to calculate P/E

P/E ratio = Share price ÷ Earnings per share (EPS)

Example: a share at $60 with earnings of $3 per share over the last year has a P/E of 20. Investors are paying $20 for every $1 of annual profit.

Trailing vs forward P/E

Trailing P/E uses earnings from the last 12 months. It’s based on actual results.
Forward P/E uses analysts’ estimates of earnings over the next 12 months. It looks ahead but depends on forecasts that can be wrong.

What a high or low P/E means

A high P/E usually means investors expect strong earnings growth, or that the stock is expensive. A low P/E can mean the stock is cheap, or that investors expect earnings to fall. P/E is most useful for comparing companies in the same industry, or a company with its own history; typical P/Es differ a lot between sectors.

If a company has no profit or a loss, the P/E isn’t meaningful and is usually shown as blank or “N/A”.

Related measures

Earnings yield = EPS ÷ Price, the P/E turned upside down. A P/E of 20 is a 5% earnings yield, which some investors compare with bond yields.
PEG ratio = P/E ÷ expected annual earnings growth rate (%). It adjusts P/E for growth: a P/E of 30 with 30% growth gives a PEG of 1.

Finding P/E on TradingView

TradingView shows valuation figures in a symbol’s financials and key stats, and the stock screener can filter and sort stocks by P/E. Other fundamentals: dividends and stock splits.

Educational explanation only. ChartWatch is independent and doesn’t give trading or investment advice. Trading carries a risk of loss.

FAQ

What is a good P/E ratio?

There's no single good number. Compare a company's P/E with similar companies in its industry and with its own history.

How do you calculate the P/E ratio?

Divide the share price by the earnings per share. A $60 share with $3 of earnings per share has a P/E of 20.

What does a negative P/E mean?

The company made a loss, so the ratio isn't meaningful. Most sites show it as N/A.

What is the difference between trailing and forward P/E?

Trailing P/E uses the last 12 months of actual earnings; forward P/E uses estimated earnings for the next 12 months.

More free TradingView tools

ChartWatch is an independent tool and is not affiliated with, endorsed by, or officially connected to TradingView, Inc. “TradingView” is a trademark of its respective owner. Exchange, broker and platform names are trademarks of their respective owners.

P/E Ratio (Price-to-Earnings)