Price to earnings (P/E)
What you pay for one unit of last year's profit.
It is the crudest possible statement of the price of an earnings stream, which is why it is the first number most investors look at and the one most often misread.
How it is computed here
Share price / earnings per share
Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it. Filed under value. Neither a high nor a low reading is good on its own, so it is never coloured as one.
The readings, and where the lines come from
| Range | Reading |
|---|---|
| below 10.00x | Statistically cheap |
| 10.00x to 15.00x | Within Graham's defensive ceiling |
| 15.00x to 25.00x | Ordinary market range |
| 25.00x to 40.00x | Growth is priced in |
| 40.00x and above | Priced for a great deal to go right |
A practitioners’ convention, not an estimated boundary. Graham, The Intelligent Investor (rev. ed. 1973), ch. 14 defensive-investor criteria. The wider steps above 15x are market convention, not an estimated boundary.
When it misleads
- On a cyclical business at peak earnings this looks cheapest exactly when it is most dangerous, and dearest at the trough.
- Negative earnings make the ratio meaningless, so it is withheld rather than shown as a large positive number.
- A one-off gain or writedown in the denominator moves it without anything changing in the business.
- The stored figure prefers the vendor trailing-twelve-month ratio when one is published, so it can differ from a recompute off the latest annual statements. The source trail shows both.
- After a split, filed per-share figures are restated to today's share count, and the split is cited.
Reads differently for REITs, banks: the figure is shown with that caveat attached.
Ten filed years of it, company by company
Any covered company has the page at /metrics/pe-ratio/TICKER. These are the ones with at least 5 computed years among the largest companies covered, listed alphabetically.
AAPL · ABBV · ABT · ADI · AMAT · AMD · AMGN · AMZN · ANET · APH · AVGO · AXP · BAC · BLK · C · CAT · COP · COST · CRM · CSCO · CVX · DE · DELL · DHR · DIS · ETN · GE · GILD · GOOG · GS · HD · IBM · INTC · JNJ · JPM · KLAC · KO · LIN · LLY · LRCX · MA · MCD · META · MRK · MS · MSFT · MU · NEE · NFLX · NOW · NVDA · ORCL · PEP · PFE · PG · PM · QCOM · RTX · SCCO · SCHW · STX · T · TJX · TMO · TMUS · TSLA · TXN · UNH · UNP · VZ · WFC · WMT
Questions
How is price to earnings calculated?
Share price / earnings per share. Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it.
What does price to earnings tell a value investor?
It is the crudest possible statement of the price of an earnings stream, which is why it is the first number most investors look at and the one most often misread.
When does price to earnings mislead?
On a cyclical business at peak earnings this looks cheapest exactly when it is most dangerous, and dearest at the trough. Negative earnings make the ratio meaningless, so it is withheld rather than shown as a large positive number. A one-off gain or writedown in the denominator moves it without anything changing in the business. The stored figure prefers the vendor trailing-twelve-month ratio when one is published, so it can differ from a recompute off the latest annual statements. The source trail shows both. After a split, filed per-share figures are restated to today's share count, and the split is cited.