P/E ratio
The share price divided by a year of profit per share: how many years of today's profit you pay for.
Worked example · a round-number company
Market cap$10.0B÷Net income, 12 months$500M=P/E20.0xShare price$50.00÷EPS$2.50=P/E20.0xHow to read it
↓Lower is better. A low P/E pays less for each dollar of profit, but it can also mean the market expects profit to fall.
Example Co. 20.0x
Under 15x15x to 30xOver 30x
The S&P 500 has mostly traded between 15x and 25x.
Keep in mind
- Blank when profit is zero or negative.
- One-off gains or charges swing it; check net income.