Answer first
What this calculator tells you
Calculate a stock's price-to-earnings ratio and earnings yield from its price and earnings per share. Compare what you pay for a dollar of earnings against the same company's history and its peers. Formula: P/E = share price ÷ earnings per share; earnings yield = earnings per share ÷ share price. At the worked-example inputs, the price-to-earnings ratio is 25.00×. Holding every other input steady, moving share price from $120 to $180 moves the result from 20.00× to 30.00×.
Transparent method
The formula
Compare what you pay for a dollar of earnings against the same company's history and its peers.
Worked example
Example inputs
How to interpret the result
A P/E ratio says how many dollars the market pays for one dollar of a company's yearly profit. At a $150 price and $6 of earnings, that is 25 times, or a 4 percent earnings yield if you flip it over. The flip is useful: it puts a stock's profit return on the same footing as a bond's interest rate, which makes the price feel less abstract.
At the worked-example inputs the price-to-earnings ratio is 25.00×. It rises with share price and falls as earnings per share (trailing 12 months) increases.
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results.
Before you rely on it
What to check
Confirm which earnings sit under the ratio: last twelve months, the last fiscal year or a forecast. Each gives a different P/E for the same price.
The common error
Where people go wrong with p/e ratio calculator
Calling a low P/E cheap by default. Earnings that are about to fall make a low ratio a warning, and a company earning almost nothing shows a huge one that means little.
Sensitivity evidence
How share price changes the price-to-earnings ratio
Holding every other input at the worked-example value, moving share price from $120 to $180 moves the price-to-earnings ratio from 20.00× to 30.00×: a spread of 10.00×, or 40% of the worked-example result.
| Share price | Price-to-earnings ratio | Earnings yield |
|---|---|---|
| $120 | 20.00× | 5.0% |
| $135 | 22.50× | 4.4% |
| $150worked example | 25.00× | 4.0% |
| $165 | 27.50× | 3.6% |
| $180 | 30.00× | 3.3% |
Every input, tested
Which input moves the price-to-earnings ratio most
Of the 2 inputs, share price moves the price-to-earnings ratio most (5.00× across the range tested) and earnings per share (trailing 12 months) moves it least (5.05×).
| Input | Tested from | To | Price-to-earnings ratio at each end | Swing |
|---|---|---|---|---|
| Share price | $135 | $165 | 22.50× to 27.50× | 5.00× (20%) |
| Earnings per share (trailing 12 months) | $5.40 | $6.60 | 27.78× to 22.73× | 5.05× (20%) |
Two variables at once
Price-to-earnings ratio by share price and earnings per share (trailing 12 months)
Across the grid the price-to-earnings ratio runs from 16.67× to 37.50×. Moving share price from $120 to $180 shifts it by 10.00× at the middle column, and moving earnings per share (trailing 12 months) from $4.80 to $7.20 shifts it by 10.42× at the middle row, so earnings per share (trailing 12 months) is the bigger lever here.
| Share price \ Earnings per share (trailing 12 months) | $4.80 | $6.00 | $7.20 |
|---|---|---|---|
| $120 | 25.00× | 20.00× | 16.67× |
| $135 | 28.13× | 22.50× | 18.75× |
| $150 | 31.25× | 25.00× | 20.83× |
| $165 | 34.38× | 27.50× | 22.92× |
| $180 | 37.50× | 30.00× | 25.00× |
The highlighted cell is the worked example: 25.00×.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Share price | $150 | Enter the share price used in this calculation. |
| Earnings per share (trailing 12 months) | $6.00 | Net income divided by shares outstanding, from the company's income statement. |
| Price-to-earnings ratio | 25.00× | |
| Earnings yield | 4.0% | |
Inputs, definitions and assumptions
Share price
Enter the share price used in this calculation. The prefilled worked-example value is $150.
Earnings per share (trailing 12 months)
Net income divided by shares outstanding, from the company's income statement. The prefilled worked-example value is $6.00.
How to use this calculator
- 1Verify the inputs. Gather share price and earnings per share (trailing 12 months) from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the price-to-earnings ratio at 25.00×. Store your own version of it as Scenario A.
- 3Test one change. Start with share price, the input with the biggest effect here: moving share price from $135 to $165 takes the price-to-earnings ratio from 22.50× to 27.50×, a swing of 20% of the worked-example figure.
- 4Check the extremes. At half the example share price ($75) the price-to-earnings ratio is 12.50×; at double ($300) it is 50.00×.
People also ask
Frequently asked questions
How do you calculate p/e ratio?
P/E = share price ÷ earnings per share; earnings yield = earnings per share ÷ share price. Enter share price in dollars and earnings per share (trailing 12 months) in dollars. At the worked-example inputs the price-to-earnings ratio is 25.00×.
What does the p/e ratio result mean?
Compare what you pay for a dollar of earnings against the same company's history and its peers. At the worked-example inputs the price-to-earnings ratio is 25.00×. It rises with share price and falls as earnings per share (trailing 12 months) increases.
How much does share price change the price-to-earnings ratio?
Holding every other input at the worked-example value, moving share price from $120 to $180 moves the price-to-earnings ratio from 20.00× to 30.00×, a spread of 10.00×.
What are the limits of this p/e ratio calculator?
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results. The tables on this page test share price only from $120 to $180; a value outside that range is not tabulated here.
Which input moves the price-to-earnings ratio most in the p/e ratio calculator?
Ranked by how far each moves the price-to-earnings ratio across the range tested: share price (5.00×, 20%) and earnings per share (trailing 12 months) (5.05×, 20%).
If I double share price in the p/e ratio calculator, does the price-to-earnings ratio double?
Doubling it from $150 to $300 takes the price-to-earnings ratio from 25.00× to 50.00×, which is 2.00 times the worked-example figure. So the result scales almost exactly in proportion. Halving it to $75 gives 12.50×.
How much does earnings per share (trailing 12 months) matter in the p/e ratio calculator?
The worked example uses $6.00. Holding every other input at its worked-example value, moving earnings per share (trailing 12 months) from $5.40 to $6.60 takes the price-to-earnings ratio from 27.78× to 22.73×, a swing of 20% of the worked-example figure.
Which inputs change the earnings yield in the p/e ratio calculator?
At the worked-example inputs it is 4.0%. Share price takes it from 4.4% to 3.6% and earnings per share (trailing 12 months) takes it from 3.6% to 4.4%.
How should my allocation change as I get older?
The common approach reduces exposure to volatile assets as the horizon shortens, because there is less time to recover from a decline and, once withdrawals begin, sequence of returns starts to matter enormously. The right path depends on when the money is needed and what other income exists, not on age alone.
Sources and evidence
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