How to Calculate Price Earnings Ratio
What is Price Earnings Ratio?
Calculates P/E ratio to assess stock valuation relative to earnings and compare to market multiples.
Formula
P/E Ratio = Stock Price / Earnings Per Share
Step-by-Step Guide
- 1Enter current stock price
- 2Input earnings per share (EPS)
- 3Calculate and interpret P/E ratio
Worked Examples
Input
Stock $50, EPS $2.50
Result
P/E ratio = 20x
Stock appears moderately valued
Common Mistakes to Avoid
- ✕Using annual earnings instead of EPS
- ✕Comparing P/E across different industries without adjustment
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