Investing Basics

What Is the P/E Ratio?

The price-to-earnings ratio (P/E) compares a company's share price with its earnings per share. P/E = share price ÷ earnings per share. It shows how much investors are paying for each unit of a company's earnings and is one of the most widely quoted valuation measures.

Example

A share priced at 60 with earnings of 3 per share has a P/E of 20.

Trailing vs. Forward

Trailing P/E uses the past 12 months of earnings; forward P/E uses analysts' estimates of future earnings. P/E ratios vary widely between industries.

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🔗 Related Terms

Stock Return on Investment (ROI) Dividend Yield

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.