A company share price divided by earnings per share for a stated historical or forecast period.
How it works
The P/E ratio compares equity value per share with earnings per share. Trailing P/E uses reported earnings; forward P/E uses estimates and therefore carries forecast risk.
Example
A share price of 60 and earnings of 3 per share produce a P/E of 20.
Limitations
It is not meaningful with negative or distorted earnings and does not directly capture debt, cash flow, growth quality, cyclicality, or accounting differences.
Evidence LedgerHow this insight was built
Human reviewedThesis being tested
This definition explains Price-to-Earnings Ratio accurately, with its practical use and material limitations.
Key assumptions
- The named calculation or convention is stated where definitions vary.
- The example is illustrative and not a forecast or recommendation.
What could invalidate the view
- A different market, instrument, jurisdiction, or methodology may use the term differently.
- The cited authority may revise its guidance or terminology.
- Editorial ownership
- Market Master · reviewed
- Approval state
- Reviewed financial content
- Evidence currency
- Current evidence window
- Source coverage
- 2 documented sources
Sources used for this insight