P/E Ratio Calculator

Calculate price-to-earnings ratio, earnings yield, and implied fair value. See whether a stock is trading at a premium or discount to your target P/E multiple.

Use trailing twelve-month (TTM) EPS or forward EPS. Negative EPS makes P/E undefined.

The P/E multiple you consider fair value for this stock based on growth and sector.

Formula

P/E ratio formula

P/E Ratio Price Per Share ÷ Earnings Per Share
Earnings Yield EPS ÷ Price × 100 (= 1 ÷ P/E × 100)
Implied Fair Value EPS × Fair P/E
Premium / Discount (Price − Fair Value) ÷ Fair Value × 100

Worked Example

Given

Price $150 · EPS $7.50 · Fair P/E target = 20×

P/E Ratio
$150 ÷ $7.50 = 20.0×
Earnings Yield
$7.50 ÷ $150 × 100 = 5.00%
Implied Fair Value
$7.50 × 20 = $150
Premium / Discount
($150 − $150) ÷ $150 × 100 = 0% (fairly valued)

Frequently Asked Questions

What is the P/E ratio?
The price-to-earnings ratio is the current share price divided by earnings per share. It tells you how many dollars investors are paying for each dollar of annual earnings. A P/E of 20 means investors pay $20 for every $1 of earnings. Higher P/E multiples imply higher expected growth; lower multiples suggest value or slower growth expectations.
What is earnings yield and why is it useful?
Earnings yield is the inverse of P/E: EPS ÷ Price × 100. It expresses earnings as a percentage return on the stock price, making it directly comparable to bond yields and interest rates. When earnings yield is below the risk-free rate, stocks are arguably expensive relative to bonds.
How do I set a fair P/E target?
Fair P/E estimates vary by methodology. A common approach is to use the sector average P/E, or to use the earnings growth rate as the P/E (the PEG ratio = 1 approach). A company growing earnings at 15% per year may deserve a 15× P/E. High-quality, durable businesses often command premiums (25×+); cyclical businesses trade at discounts (8–12×).
Should I use trailing or forward EPS?
Trailing EPS (actual last 12 months) is factual but backward-looking. Forward EPS (analyst consensus estimate for the next 12 months) is more relevant for valuation but depends on the accuracy of estimates. Both approaches are valid — many investors look at both and compare the trailing vs. forward P/E to gauge whether estimates imply acceleration or deceleration.