Price-to-Earnings (P/E): Definition, Formula, and How to Calculate It
P/E ratio measures how much investors are willing to pay per dollar of earnings. It is commonly used to compare valuation across companies or industries.
Exact formula
Use EPS (TTM) for trailing P/E and forward EPS for forward P/E comparisons.
Notes
- High P/E can indicate expectation of future growth or overvaluation.
- P/E is less useful for companies with negative earnings.