About

The Price-to-Earnings (P/E) Ratio is arguably the most cited metric in fundamental equity analysis. It serves as a thermometer for a stock's valuation, telling investors how much they are paying for every dollar of earnings the company generates. A high P/E might indicate that a stock's price is high relative to earnings and possibly overvalued, or it may imply that investors are expecting high future growth rates.

Conversely, a low P/E might indicate that the current stock price is low relative to earnings, possibly undervalued or that the company is performing poorly relative to its past trends. This calculator helps traders and long-term investors instantly compute the P/E ratio and compares it against historical industry benchmarks, providing essential context for buy/sell decisions.

Formulas

The P/E Ratio is calculated by dividing the current market price per share by the earnings per share (EPS).

P/E = Market PriceEPS

Alternatively, it can be calculated using total market capitalization and total net earnings:

P/E = Market CapNet Income

Reference Data

Sector / Industry	10-Year Average P/E	Typical Range	Growth Expectation
Technology	25.4	20 - 35	High
Healthcare	21.8	18 - 28	Moderate-High
Consumer Discretionary	22.1	15 - 25	Cyclical
Financials	14.2	10 - 18	Moderate
Energy	13.5	8 - 18	Volatile
Utilities	18.9	15 - 22	Stable/Low
Real Estate (REITs)	35.2	25 - 45	Asset-Heavy
S&P 500 (Market Avg)	19.6	15 - 25	Benchmark

Frequently Asked Questions

There is no single magic number. A 'good' P/E depends on the industry. Tech companies often command P/E ratios of 30+, while banks often trade around 10-15. Always compare a company's P/E to its specific industry average and its own historical average.

Trailing P/E uses earnings from the last 12 months (actual data), while Forward P/E uses estimated earnings for the next 12 months (analyst forecasts). Forward P/E is useful for pricing in future growth, but relies on predictions that may be wrong.

Mathematically, yes, if the company has negative earnings (a loss). However, in financial reporting, a negative P/E is usually reported as 'N/A' (not applicable), as it's impossible to value a loss-making company using this specific metric.

Not necessarily. A stock might have a low P/E because the market expects its earnings to decline significantly in the future (a 'value trap'). Context is key.