P/E Ratio Calculator
Calculate trailing and forward P/E ratios, earnings yield, and see how your stock compares to sector averages.
| Sector | Avg P/E | Notes |
|---|---|---|
| Technology | ~28 | Growth premium, high multiples common |
| Consumer Staples | ~23 | Defensive, stable earnings |
| Utilities | ~18 | Regulated, bond-like characteristics |
| Healthcare | ~22 | Mix of pharma, devices, and services |
| Financials | ~13 | Book value often more relevant |
| Energy | ~12 | Cyclical — P/E swings widely |
| S&P 500 Historical Avg | ~16 | Long-run mean reversion benchmark |
What Is the P/E Ratio?
The price-to-earnings (P/E) ratio is the most widely used valuation metric in stock analysis. It answers a simple question: how much are investors willing to pay for every $1 of a company's earnings? A P/E of 20 means the market pays $20 for each $1 of annual profit.
Trailing vs. Forward P/E
The trailing P/E uses the last 12 months of actual reported earnings. It is backward-looking and based on real numbers. The forward P/E uses analyst estimates of future earnings — it reflects market expectations but is less certain. When a stock's forward P/E is lower than trailing, the market expects earnings growth.
Earnings Yield
The earnings yield is simply 1 ÷ P/E, expressed as a percentage. It lets you compare stocks to bonds: a stock with a P/E of 25 has an earnings yield of 4%, which you can compare to the 10-year Treasury yield to assess relative value.
Limitations
The P/E ratio is meaningless for companies with negative earnings. It also struggles with cyclical stocks — an energy company may look expensive at a market peak (low earnings) and cheap at a trough (high earnings), the opposite of reality. For high-growth companies, consider also looking at the PEG ratio (P/E divided by earnings growth rate), which adjusts for the growth premium.