P/E ratio (price to earnings)

Also called: price earnings, p/e, pe ratio, multiple

How many pounds or dollars investors pay for each 1 of yearly profit per share. It's the most common shortcut for how expensive a share is.

Formula

P/E = Share price ÷ Earnings per share (EPS)

Worked example

1. Share price = $80.00
2. EPS (last 12 months) = $3.00
3. P/E = $80.00 ÷ $3.00

Result: 26.7×

How to read it

Lower can mean cheaper, but compare within the same industry. Fast-growing companies usually have higher P/Es. A P/E of 20 means it would take 20 years of today's profit to earn back the share price.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)