Price-to-Earnings Ratio Calculator: Is the Stock Cheap?

Is a 25.00 P/E cheap or expensive?

On the defaults — a $150.00 share price and $6.00 of earnings per share — the price-to-earnings ratio is 25.00. The price-to-earnings ratio is the share price divided by earnings per share, usually the trailing twelve months of earnings — and it shows how many dollars of price each dollar of annual earnings costs. As a rough yardstick, a P/E below 15 is cheap, 15–25 is fair, and above 25 is expensive — but the bar moves by sector: fast-growing technology stocks often run above 30 because investors pay for future earnings, while banks and utilities often run below 15 because their earnings grow slowly, so compare within one industry, not across them. A 25.00 P/E sits at the top of the fair range — twenty-five dollars of price for each dollar of annual earnings, roughly twenty-five years of current earnings to pay back the price, if earnings never grew.

Three things about the model are worth stating plainly.

First, the price-to-earnings ratio is $150.00 ÷ $6.00 = 25.00. Second, the share price needed for a 20.00 P/E is 20.00 × $6.00 = $120.00. And third, the earnings per share needed for a 20.00 P/E is $150.00 ÷ 20.00 = $7.50; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $150.00 share price, $6.00 of earnings per share, target P/E 20.00.

Line 1 — the ratio. The price-to-earnings ratio is $150.00 ÷ $6.00 = 25.00.

Line 2 — the price needed. The share price needed for a 20.00 P/E is 20.00 × $6.00 = $120.00.

Line 3 — the earnings needed. The earnings per share needed for a 20.00 P/E is $150.00 ÷ 20.00 = $7.50.

Line 4 — the check. $6.00 of earnings per share × 25.00 = $150.00, the share price; and each $1 of annual earnings costs $25.00 of price.

Every branch, checked

Share price $120.00: Share price $120.00; earnings per share $6.00; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $6.00 — With a share price of $120.00 the P/E falls to 20.00 — twenty dollars of price for each dollar of annual earnings.

EPS $5.00: Share price $150.00; earnings per share $5.00; Price-to-earnings ratio 30.00; share price needed for the 20.00 target $100.00; earnings per share needed for the 20.00 target $7.50 — With earnings per share of $5.00 the P/E rises to 30.00 — thirty dollars of price for each dollar of annual earnings.

Share price $180.00: Share price $180.00; earnings per share $6.00; Price-to-earnings ratio 30.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $9.00 — With a share price of $180.00 the P/E rises to 30.00 — the same earnings behind a higher price.

EPS $7.50: Share price $150.00; earnings per share $7.50; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $150.00; earnings per share needed for the 20.00 target $7.50 — With earnings per share of $7.50 the P/E falls to 20.00 — the same price behind higher earnings.

Share price $0: Share price $0.00; earnings per share $6.00; Price-to-earnings ratio 0.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $0.00 — With a share price of $0 the P/E is 0.00 — a free share costs nothing per dollar of earnings.

EPS $3.00: Share price $150.00; earnings per share $3.00; Price-to-earnings ratio 50.00; share price needed for the 20.00 target $60.00; earnings per share needed for the 20.00 target $7.50 — With earnings per share of $3.00 the P/E rises to 50.00 — fifty dollars of price for each dollar of annual earnings.

What-if bars — Share price halved, EPS doubled, share price doubled: Share price halved to $75.00: P/E 12.50; EPS doubled to $12.00: P/E 12.50; share price doubled to $300.00: P/E 50.00 — Halving the share price halves the P/E to 12.50; doubling the earnings halves it to 12.50; doubling the share price doubles it to 50.00.

The reverses, worked backwards

Smallest whole-cent share price for the P/E to reach 20.00: At the displayed $120.00 the figures are Share price $120.00; earnings per share $6.00; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $6.00. At the displayed $120.00 the P/E is 20.00 (exactly 20.00). At $119.99 the price is $0.01 short of the $120.00 needed — and the unrounded P/E is 19.998333, which displays as 20.00 after rounding, so $120.00 is the smallest whole-cent share price for the P/E to reach 20.00.

Smallest whole-cent share price for the P/E to reach 25.00: At the displayed $150.00 the figures are Share price $150.00; earnings per share $6.00; Price-to-earnings ratio 25.00; share price needed for the 25.00 target $150.00; earnings per share needed for the 25.00 target $6.00. At the displayed $150.00 the P/E is 25.00 (exactly 25.00). At $149.99 the price is $0.01 short of the $150.00 needed — and the unrounded P/E is 24.998333, which displays as 25.00 after rounding, so $150.00 is the smallest whole-cent share price for the P/E to reach 25.00.

Largest whole-cent earnings per share for the P/E to STAY at or above 25.00: At the displayed $6.00 the figures are Share price $150.00; earnings per share $6.00; Price-to-earnings ratio 25.00; share price needed for the 25.00 target $150.00; earnings per share needed for the 25.00 target $6.00. At the displayed $6.00 the P/E is 25.00 (exactly 25.00). At $6.01 the P/E is 24.96 — and the unrounded P/E is 24.958403, plainly below the 25.00 line, no rounding trap — so $6.00 is the largest whole-cent earnings per share for the P/E to stay at or above 25.00.

Smallest whole-cent share price for the P/E to reach 15.00: At the displayed $90.00 the figures are Share price $90.00; earnings per share $6.00; Price-to-earnings ratio 15.00; share price needed for the 15.00 target $90.00; earnings per share needed for the 15.00 target $6.00. At the displayed $90.00 the P/E is 15.00 (exactly 15.00). At $89.99 the price is $0.01 short of the $90.00 needed — and the unrounded P/E is 14.998333, which displays as 15.00 after rounding, so $90.00 is the smallest whole-cent share price for the P/E to reach 15.00.

Largest whole-cent earnings per share for the P/E to STAY at or above 20.00: At the displayed $7.50 the figures are Share price $150.00; earnings per share $7.50; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $150.00; earnings per share needed for the 20.00 target $7.50. At the displayed $7.50 the P/E is 20.00 (exactly 20.00). At $7.51 the P/E is 19.97 — and the unrounded P/E is 19.973369, plainly below the 20.00 line, no rounding trap — so $7.50 is the largest whole-cent earnings per share for the P/E to stay at or above 20.00.

Smallest whole-cent share price for the P/E to reach 30.00: At the displayed $180.00 the figures are Share price $180.00; earnings per share $6.00; Price-to-earnings ratio 30.00; share price needed for the 30.00 target $180.00; earnings per share needed for the 30.00 target $6.00. At the displayed $180.00 the P/E is 30.00 (exactly 30.00). At $179.99 the price is $0.01 short of the $180.00 needed — and the unrounded P/E is 29.998333, which displays as 30.00 after rounding, so $180.00 is the smallest whole-cent share price for the P/E to reach 30.00.

A warning about the neighbours: every price neighbour above shows as the target when rounded to two decimals, but its unrounded P/E is a hair below the target. A buyer underwriting on the unrounded P/E would still say no where the unrounded figure misses the line. The page prints the unrounded neighbour value in full so the rounding does not mislead you: 19.998333, 24.998333, 24.958403, 14.998333, 19.973369 and 29.998333.

What the defaults assume

The defaults are a $150.00 share price, $6.00 of earnings per share and a target P/E of 20.00 — Share price $150.00; earnings per share $6.00; Price-to-earnings ratio 25.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $7.50. With Share price $120.00, Share price $120.00; earnings per share $6.00; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $6.00. With EPS $5.00, Share price $150.00; earnings per share $5.00; Price-to-earnings ratio 30.00; share price needed for the 20.00 target $100.00; earnings per share needed for the 20.00 target $7.50. With Share price $180.00, Share price $180.00; earnings per share $6.00; Price-to-earnings ratio 30.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $9.00. With EPS $7.50, Share price $150.00; earnings per share $7.50; Price-to-earnings ratio 20.00; share price needed for the 20.00 target $150.00; earnings per share needed for the 20.00 target $7.50. With Share price $0, Share price $0.00; earnings per share $6.00; Price-to-earnings ratio 0.00; share price needed for the 20.00 target $120.00; earnings per share needed for the 20.00 target $0.00. With EPS $3.00, Share price $150.00; earnings per share $3.00; Price-to-earnings ratio 50.00; share price needed for the 20.00 target $60.00; earnings per share needed for the 20.00 target $7.50. With What-if bars — Share price halved, EPS doubled, share price doubled, Share price halved to $75.00: P/E 12.50; EPS doubled to $12.00: P/E 12.50; share price doubled to $300.00: P/E 50.00. With Share price $0, Price-to-earnings ratio 0.00. With EPS $0, Price-to-earnings ratio — (undefined: no earnings to divide by). With Share price $119.99, Price-to-earnings ratio 20.00. With EPS $6.01, Price-to-earnings ratio 24.96. With Share price $120.00, Price-to-earnings ratio 20.00. With EPS $7.51, Price-to-earnings ratio 19.97. With EPS −$2.00, Price-to-earnings ratio −75.00. With P/E bars, Share price $60.00: P/E 10.00; share price $300.00: P/E 50.00; EPS $12.00: P/E 12.50; EPS $3.00: P/E 50.00. With EPS of −$2.00, the P/E is −75.00 — a negative P/E means the company lost money, so the ratio is negative and meaningless as a valuation multiple.

A note on the rounding: with a share price of $119.99 the unrounded P/E is 19.998333, which rounds half-up to 20.00 — but it is still below the 20.00 line. With earnings per share of $6.01 the unrounded P/E is 24.958403, which rounds to 24.96. With earnings per share of $7.51 the unrounded P/E is 19.973369, which rounds half-up to 19.97 — but it is just below the 20.00 line. The page prints the unrounded values so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The investor checking a stock before buying: they learn a $150.00 share price on $6.00 of earnings per share is a 25.00 P/E — and they check the $120.00 reverse to see the smallest price for a 20.00 P/E.
• The shareholder watching earnings season: they learn a 20.00 P/E needs $7.50 of earnings per share on a $150.00 share price — and they check the $6.00 reverse to see the largest earnings that keep the P/E at or above 25.00.
• The value hunter scanning for cheap stocks: they learn a P/E below 15 is cheap by the rough yardstick — and they check the $90.00 reverse to see the smallest price for a 15.00 P/E.
• The student learning valuation ratios: they learn the P/E is price divided by earnings, not income divided by price — and they check the $180.00 reverse to see the smallest price for a 30.00 P/E.

Accuracy & limitations

The math is first-principles: the price-to-earnings ratio is the share price divided by earnings per share; the share price needed at the target is the target P/E times earnings per share; the earnings per share needed at the target is the share price divided by the target P/E — all rounded to two decimals half-up. The reverses are judged on the UNROUNDED P/E: a neighbour one cent short shows as the target when rounded to two decimals, but its unrounded P/E is below the target, so it does not meet the bar — the page prints the unrounded neighbour value in full. Negative earnings make the P/E negative: at −$2.00 of earnings per share the P/E is −75.00 — a negative P/E means the company lost money, so the ratio is negative and meaningless as a valuation multiple — the calculator shows the negative figure with a note, never hides it and never shows “—” for it. Zero earnings is undefined: with no earnings there is nothing to divide by, so the ratio cannot be computed — the calculator shows “—” with a note, never Infinity or NaN. What the model cannot do is judge the stock: use TRAILING-TWELVE-MONTH earnings when the P/E is compared across years, because one quarter alone can mislead for seasonal businesses; a P/E below 15 is cheap, 15–25 is fair, and above 25 is expensive — but the bar moves by sector, so compare within one industry, not across them; fast-growing technology stocks often run above 30 because investors pay for future earnings, while banks and utilities often run below 15 because their earnings grow slowly; and the P/E does not account for growth (the PEG ratio adjusts for it), debt, or cash — a company can look cheap on P/E while carrying heavy debt, so cross-check with the cash flow margin and the operating cash flow ratio. Use it to see how many dollars of price each dollar of annual earnings costs — then read the rest of the accounts.

Frequently asked questions