P/E calculator
Calculate a stock’s current price-to-earnings ratio and a fair price from a historical or chosen P/E.
What is the P/E ratio?
The price-to-earnings ratio shows how many years of earnings the share price costs. A P/E of 22 means you pay 22 for 1 of earnings. The calculator compares that price with a fair P/E, such as the average of recent years.
Formula
P/E = share price / earnings per share. Fair price = earnings per share × fair P/E.
How the P/E calculator works
Price divided by earnings per share is today’s P/E. Earnings per share times the fair P/E is the price if the market paid that average again. Above it, the stock is richer than usual on this measure. Below it, cheaper.
Worked example
Price 200, earnings per share 8, fair P/E 22. Current P/E: 25.0. Fair price: 176.00. The price sits 14% above it.
Assumptions and notes
- Earnings per share should be recurring, not a one-off gain.
- The fair P/E is your assumption, often that stock’s own historical average.
- A high P/E can fit growing earnings. This calculator does not model growth.
- The calculator is a model, not investment advice.
Sample results
| Price | Earnings per share | Current P/E | Fair price |
|---|---|---|---|
| 150.00 $ | 8.00 $ | 18.8 | 160.00 $ |
| 200.00 $ | 8.00 $ | 25.0 | 176.00 $ |
| 120.00 $ | 6.00 $ | 20.0 | 108.00 $ |
| 90.00 $ | 5.00 $ | 18.0 | 75.00 $ |
How do I calculate a stock’s P/E?
Divide the share price by earnings per share. At a price of 200 and earnings of 8, the P/E is 25.
What P/E is fair?
There is no fixed number. Use the average that same stock traded at in recent years, or a multiple you would pay for the quality of its earnings.
What if the P/E is above the fair average?
The market is paying more for earnings than your assumption. On this measure the stock is richer than usual.
Does this fit every company?
Only when earnings are sustainable. With losses the P/E is not meaningful. Use the DCF calculator instead.