Meaning and calculation
How much are you paying for every dollar of current company earnings? The price-to-earnings ratio compares the prevailing stock price against annual diluted earnings per share.
P/E = share price ÷ annual earnings per share
Source references: FINRA: Defining the Value of an Investment
A hypothetical worked example
Hypothetical: Dividing a stock price of 20 dollars by an annual diluted EPS of USD 2 produces a P/E ratio of 10.
What can make this comparison misleading?
A low P/E ratio does not automatically signal a bargain if underlying earnings are cyclical or about to decline sharply.
What to record beside the number
- The filing URL, document section and issuer identity.
- The reporting period, currency, units and whether the figure is reported or calculated.
- The exact formula and any missing inputs or differences in definitions.
Sources & corrections
Prepared with AI assistance and automated source and calculation checks. No independent human analyst review is claimed. Hypothetical examples and historical data are identified in the text.
Use the linked primary sources to check definitions and company disclosures. Filings and service details can change; verify the relevant period before relying on a figure.
Found an error? Send a correction with the page, the claim and a supporting source. These guides provide general education; they do not assess your financial circumstances or recommend a trade. Read our research disclosures.