PE Ratio Calculator
Calculate price-to-earnings ratio to evaluate a company's valuation
| Metric | Your Company | Industry Average | Difference |
|---|---|---|---|
| PE Ratio | - | - | - |
| Implied Stock Price* | - | - | - |
The Price-to-Earnings (PE) ratio compares a company's stock price to its earnings per share, helping investors assess if a stock is overvalued or undervalued relative to its earnings.
• Potentially undervalued stock
• Higher margin of safety
• Better value for money
• Possibly overlooked by market
• Growth expectations priced in
• Higher risk if growth doesn't materialize
• May indicate overvaluation
• Future earnings already anticipated
A PE Ratio Calculator (Price-to-Earnings Ratio Calculator) is a fundamental tool for investors to assess whether a stock is overvalued, undervalued, or fairly priced relative to its earnings.
How the PE Ratio Calculator Works
Basic PE Ratio Formula
Where:
EPS = (Net Income - Preferred Dividends) ÷ Outstanding Shares
Example Calculation
| Input | Value |
|---|---|
| Stock Price | $150 |
| EPS (TTM) | $10 |
| PE Ratio | 15 |
Interpretation:
Investors pay $15 for every $1 of earnings.
Compare to industry averages (e.g., Tech ≈ 25, Banks ≈ 10).
Key Inputs Required
Stock Price – Current market price.
Earnings Per Share (EPS) – Trailing 12 months (TTM) or forecasted.
Variations:
Forward PE (Uses estimated future EPS)
TTM PE (Uses past 12-month EPS)
Why PE Ratio Matters
✅ Quick Valuation Check – Is the stock cheap or expensive?
✅ Compare Companies – Within the same industry.
✅ Market Sentiment Gauge – High PE = growth expectations.
PE Ratio Benchmarks
| Industry | Avg. PE (2024) |
|---|---|
| Technology | 25-30 |
| Healthcare | 18-22 |
| Financials | 10-14 |
| Utilities | 12-16 |
Note: High-growth sectors (e.g., AI) often have higher PEs.
How to Use PE Ratios Wisely
✔ Compare to Industry Peers – A PE of 20 may be high for a bank but low for a tech firm.
✔ Check Historical PE – Is the current ratio above/below its 5-year average?
✔ Combine with Other Metrics – PEG ratio, ROE, debt levels.
Limitations
⚠ Earnings Manipulation – Companies may adjust EPS.
⚠ Ignores Growth – A high PE could mean overvaluation OR high growth potential.
⚠ Sector Bias – Useless for comparing across industries.
PE vs. Other Valuation Metrics
| Metric | Formula | Best For |
|---|---|---|
| PE Ratio | Price ÷ EPS | General valuation |
| PEG Ratio | PE ÷ Earnings Growth | Growth stocks |
| Price/Sales | Price ÷ Revenue | Unprofitable companies |
Final Thoughts
The PE Ratio is the most widely used valuation tool—but never rely on it alone. Always analyze:
Earnings growth
Industry trends
Economic conditions
Need help calculating a stock’s PE? Share the ticker & EPS below! 📊🚀