Price-to-Earnings (P/E) Ratio

Price-to-Earnings (P/E) Ratio

The price-to-earnings ratio (P/E Ratio) is the relationship between the price of 1 company’s share and the annual net income earned by the company per share (Earnings Per Share, or EPS).

You can use P/E Ratios to figure out how well the company’s shares have performed over time and how they compare against other companies in the same sector. If the ratio is high, this means that the company is either overvalued or that people expect the company to grow quickly..

P/E Ratios are often calculated over ten and thirty year periods. Generally, P/E Ratios aren’t calculated for companies that are making a loss, so the ratio would be 0.


The content on this page is for information purposes only, it does not expressly or implicitly provide financial, legal, tax, or investment advice or recommendations, the opinions are those of the author. Individual investors should make their own decision when investing as investing in securities carries risk and it’s the individual investor’s responsibility to assess the risk before making any decision. It’s the investor’s sole responsibility to make their own decisions and determine the appropriateness of an investment or strategy based on their own personal investment objectives, financial circumstances, and risk tolerance. Past performance is no guarantee of future results. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes and may not reflect actual future performance. Any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. The content provided is neither an offer to sell nor purchase any security. Opinions, news, research, analysis, prices, or other information contained on our Blog, or emailed to you, are provided as general market commentary. InvestSky does not warrant that the information is accurate, reliable, or complete. Any third-party information provided does not reflect the views of InvestSky. InvestSky shall not be liable for any losses arising directly or indirectly from misuse of information. Each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. All investing is subject to risk, including the possible loss of the money invested.

Was this article helpful? Share it!

Ready to start investing?

Join InvestSky and get a stock on us.