This P/E ratio calculator divides share price by earnings per share — the market’s favorite shorthand for “how many dollars per dollar of profit” — plus the inverted earnings yield that compares directly to bond yields.

P/E ratio –
Earnings yield (1 ÷ P/E) –
Reading –

How Many Years of Earnings Are You Buying?

The denominator comes from our EPS Calculator; trading outcomes are our Stock Profit Calculator's ground. Part of our Finance Calculators collection.

Worked Example (Verified)

  • Price $150, EPS $3.00 (defaults): P/E = 50 — you pay $50 per $1 of current annual earnings; earnings yield = 1/50 = 2%, directly comparable to a Treasury yield on the same screen
  • Same company at $75: P/E 25, yield 4% — P/E moves with price even when the business doesn't twitch; it's a market-temperature gauge, not a business-quality gauge
  • Trailing P/E uses realized EPS; forward P/E uses forecasts — a stock can wear a scary trailing 50 and a tame forward 18 if earnings are expected to jump (or the forecaster is optimistic)

P/E Discipline

  • Compare within sectors: banks at 10 and software at 35 can both be fairly priced — different growth and risk, different natural P/Es.
  • One-time gains inflate EPS and fake a low P/E (asset sales are not earnings power) — use operating/adjusted EPS for the real multiple.
  • PEG refines it: P/E ÷ growth rate ≈ 1 was Lynch's fair-value landmark, when the growth input is honest.
  • Cyclicals invert intuition: peak-cycle earnings make P/E look LOWEST exactly at the top (E is about to collapse).

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Frequently Asked Questions

How do you calculate the P/E ratio?

P/E = share price ÷ earnings per share. $150 ÷ $3.00 = 50. Equivalently, market cap ÷ net income gives the same number firm-wide. This calculator also inverts it into earnings yield for bond comparison.

What is a good P/E ratio?

Context decides: the broad US market has historically averaged ~15–20 (trailing). Growth firms legitimately trade at 30–50+; banks and cyclicals at 8–14. A P/E is “good” relative to the company's growth, sector norms and its own history — never in isolation.

What is earnings yield?

EPS ÷ price = 1/(P/E), expressed as a percent: P/E 50 → 2%. It frames the stock as an earnings stream and compares naturally with bond yields (a 2% earnings yield vs a 4.5% Treasury prices in a lot of expected growth).

What does a negative P/E mean?

Negative earnings — the company lost money, so the multiple is not meaningful (data providers show blank, “NM” or a negative number). Switch to price/sales, EV/EBITDA cautiously, or cash-flow measures for loss-makers.

Trailing vs forward P/E — which should I use?

Trailing is factual but backward; forward is relevant but forecast. Serious analysis checks both: a huge gap between them is itself information (expected earnings swing — verify why). This calculator accepts either EPS; label yours.

Is this P/E ratio calculator free?

Yes — free, instant, no sign-up.