Is the stock cheap or expensive for what it earns? Enter the share price and earnings per share to get the price-to-earnings ratio, the earnings yield, and the price-to-earnings-to-growth (PEG) read.
Answer first: the price-to-earnings ratio tells you how many dollars you pay for every $1 of a company’s annual profit. This tool divides the share price by earnings per share (EPS), then flips that into an earnings yield (the profit you “earn” per dollar invested) and, if you add a growth rate, a PEG ratio that adjusts the P/E for how fast profits are expanding.
P/E = Share price ÷ Earnings per share (EPS)
Example: a $180 stock earning $9 per share has a P/E of 20 — you pay $20 for each $1 of yearly earnings, an earnings yield of 5%. If profits grow 12% a year, the PEG is 20 ÷ 12 = 1.67.
There is no single right number, but context helps. The S&P 500’s long-run average P/E has hovered around the 15–20 range, with the cyclically-adjusted (CAPE) measure popularised by economist Robert Shiller running higher in recent decades. A fast-growing technology company might trade at 35–50 because investors expect earnings to multiply; a slow utility might sit at 12–16. A negative or “n/a” P/E means the company has no profit to divide into — common for early-stage or turnaround firms.
A trailing P/E uses the last 12 months of actual reported earnings; a forward P/E uses analysts’ estimate of next year’s earnings. Forward P/E is usually lower for a growing company because the denominator (expected earnings) is bigger. This calculator works with whichever EPS you enter — just be consistent about which one you use when comparing two stocks.
A high P/E is not automatically “expensive.” The PEG ratio divides the P/E by the earnings growth rate to put fast and slow growers on the same scale. A rough rule of thumb popularised by Peter Lynch: a PEG near 1.0 suggests the price is fair relative to growth, below 1 may be a bargain, and well above 2 means you are paying a steep premium for that growth.
Reality check: the P/E ratio uses accounting earnings, which can be distorted by one-off charges, buybacks or aggressive accounting. Always compare a stock’s P/E to its own history and to direct competitors, never in isolation. This is an educational calculator, not financial advice — verify figures against company filings on the U.S. SEC’s EDGAR database.
Read the full explainer in what is the P/E ratio, then check valuation alongside price-to-book, earnings per share and market cap.
Last updated 27 June 2026 · Written by Mustafa Bilgic. Educational only — not financial advice.
Divide the current share price by the earnings per share (EPS). A $180 stock with $9 EPS has a P/E of 20, meaning investors pay $20 for every $1 of annual profit.
It depends on the company and sector. The S&P 500 has historically averaged a P/E around 15 to 20. High-growth firms often trade higher, while slow, stable companies trade lower. Compare a stock to its own history and to peers.
Earnings yield is the inverse of the P/E ratio (EPS divided by price), expressed as a percentage. A P/E of 20 equals a 5% earnings yield, which you can compare to bond yields to judge relative value.
A negative or not-meaningful P/E means the company reported a net loss, so there are no positive earnings to divide the price by. The ratio is simply not useful until the firm is profitable.