P/E Ratio Calculator
Category: Fundamental & Economic ToolsEvaluate stock valuations, compare companies across sectors, and determine if a stock is potentially overvalued or undervalued
Stock Information
Earnings Information
P/E Ratio Analysis Results
P/E Comparison by Sector
P/E to Growth Rate Analysis
Valuation Scenarios
Fair Value Analysis
Fair value estimate based on current EPS and market average P/E ratio.
Growth-Adjusted Value
Analysis based on P/E adjusted for earnings growth rate and risk-free rate.
Forward P/E Forecast
Future valuation based on projected earnings growth and current P/E ratio.
Valuation Insights
Current Valuation
With a P/E ratio of 26.09, this stock is trading above the sector average of 24.5. This suggests the stock may be slightly overvalued compared to sector peers.
Growth Perspective
The PEG ratio of 2.61 indicates the stock is trading at a premium relative to its growth rate. A PEG ratio above 1.0 generally suggests that earnings growth is not keeping pace with the valuation.
Earnings Yield Analysis
The current earnings yield of 3.83% is slightly above the risk-free rate of 3.5%. This indicates a minimal equity risk premium, which may not adequately compensate for the additional risk of equity investment.
Forward Outlook
Based on the projected earnings growth of 10%, the stock's forward P/E of 23.72 suggests moderate potential for price appreciation. Investors should monitor earnings results against these growth expectations.
Understanding P/E Ratio Analysis
The Price-to-Earnings (P/E) ratio is one of the most widely used valuation metrics in financial markets. It compares a company's share price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.
Types of P/E Ratios
- Trailing P/E: Based on earnings from the past 12 months
- Forward P/E: Based on projected earnings for the next 12 months
- Normalized P/E: Adjusts for economic cycles by using average earnings over multiple years
- PEG Ratio: P/E ratio divided by earnings growth rate, providing context to the P/E
Interpreting P/E Values
- High P/E: May indicate overvaluation or expectations of strong future growth
- Low P/E: Could suggest undervaluation or concerns about future performance
- Negative P/E: Indicates the company is losing money (negative earnings)
- Industry Comparison: P/E should be compared with industry peers for context
- Historical Context: Compare current P/E to the company's historical average
P/E Ratio Formulas
Basic P/E Ratio
PEG Ratio
Earnings Yield
Justified P/E (Gordon Growth Model)
Limitations of P/E Analysis
- Accounting Differences: Variations in accounting practices can affect earnings figures
- Cyclical Businesses: P/E can be misleading for businesses with cyclical earnings
- Growth Not Considered: Basic P/E doesn't account for growth rates (PEG ratio addresses this)
- Negative Earnings: P/E cannot be calculated for companies with losses
- Interest Rate Environment: P/E ratios tend to be higher when interest rates are low
Spotting Overconfidence: How to Read an Elevated P/E Ratio
After running your stock through the calculator, you’re now staring at a Price-to-Earnings (P/E) ratio. Whether it’s high, low, or somewhere in between, this number can reveal more than just a surface-level valuation—it reflects expectations, sentiment, and, at times, misplaced optimism. But it’s not a buy or sell signal on its own. Instead, it’s a piece of a broader puzzle that traders need to frame properly.
Let’s break down what a stretched or compressed P/E might signal, and how to approach the result with a trader’s mindset—not just a long-term investor’s lens.
What a High P/E Could Be Telling You
- Growth Expectations Are High: A rich P/E suggests the market believes earnings will rise significantly. Whether that belief is grounded is another story.
- Sentiment Is Driving Price: In bull markets or during hype cycles, prices often outpace fundamentals. A high P/E can reflect that.
- Quality Premium: Some companies command a consistently high multiple due to strong balance sheets, predictable earnings, or dominant market positions.
What a Low P/E Could Be Hiding
- Market Doubts: A depressed P/E might reflect skepticism about future earnings, even if past results look solid.
- Cyclical Risk: For companies in boom-bust industries, a low P/E could actually signal earnings are peaking, not that the stock is cheap.
- Accounting Noise: Sometimes one-off earnings distort the “E” in P/E. Always dig into what’s behind the number.
Beyond P/E: Why Growth and Sector Context Matter
The P/E ratio alone can mislead if you’re not pairing it with growth expectations or industry benchmarks. That’s where the PEG ratio (P/E divided by earnings growth) comes in—offering a sense of how much you’re paying for each unit of expected growth.
- PEG Under 1.0: Suggests the stock may be undervalued relative to its growth.
- PEG Around 1.0–2.0: Typically signals a balanced valuation, depending on the sector.
- PEG Over 2.0: May point to overpriced optimism, especially if growth is uncertain.
Likewise, industry context matters. A “high” P/E in the energy sector means something different than in software. Comparing your stock’s ratio to its sector average can help you see whether it’s trading at a premium, a discount, or in line with its peers.
Risk Considerations When Trading Around P/E
- Valuation Compression: If growth slows or rates rise, high-multiple stocks often fall faster than others.
- Earnings Surprises: Stocks with lofty valuations can sell off hard on even modest misses.
- Interest Rate Sensitivity: As yields climb, the opportunity cost of owning high P/E names increases—money may shift toward income-generating assets.
- Sector Rotation: Changing macro conditions can shift capital out of growth sectors, leaving expensive names exposed.
What to Do After Seeing Your P/E Result
- Don’t react to the number alone. Start by comparing it to the sector average and the company’s own historical range.
- Add the PEG ratio. If growth expectations are available, use them to get a better sense of value relative to future performance.
- Check earnings quality. Look for one-off items or temporary gains that could distort earnings and skew the P/E.
- Pair with technical analysis. Combine your valuation view with trend indicators to spot better-timed entry or exit points.
- Watch interest rates. If earnings yield (the inverse of P/E) is too close to bond yields, there may be limited upside for equity investors.
Common Pitfalls to Avoid
- Assuming low P/E equals cheap: A bargain P/E may be a trap if the market is correctly forecasting a drop in earnings.
- Using trailing P/E in isolation: Always ask whether the earnings figure reflects future potential or past performance.
- Ignoring growth: Even a “fair” P/E could be overvalued if the company isn’t growing—or underappreciated if it is.
Next Steps with Your P/E Ratio Analysis
Take your calculator output as a signal—not a verdict. Whether the P/E looks rich or low, your next steps should involve layering in growth forecasts, industry positioning, and technical setups. Context is what transforms a ratio into an edge.
As you evaluate this stock, ask yourself: What assumptions are baked into this price? Is the market expecting flawless execution? Is there room for upside surprise—or is sentiment already stretched? Your trading plan should be built not just around the number, but around the expectations behind it.