Finance & Interest
Intermediate

Price-to-Earnings Ratio

Share price relative to earnings per share.

Formula

PE=PriceEPSPE = \frac{\text{Price}}{\text{EPS}}

Variables

PriceShare price
EPSEarnings per share

Example

P/E of 20 is common

Did You Know?

The price-to-earnings ratio tells you how many years of current profit you are paying for a share.

valuation