P/E Ratio (Price-to-Earnings): formula and how to read it

What you pay for each dollar of profit. Share price divided by trailing twelve-month earnings per share. A company that lost money has no meaningful P/E: it shows as Loss and ranks below every profitable company (smaller losses first), and it never passes a P/E filter.

Stock Meadow groups it under Valuation, and shows it in tables as P/E.

P/E = share price ÷ earnings per share over the trailing twelve months (TTM)

A stock trading at $50 whose earnings over the last twelve months were $2.50 per share has a P/E of 50 ÷ 2.50 = 20. Investors pay $20 for each $1 of yearly profit. The numbers are made up for illustration.

A lower P/E means you pay less for each dollar of profit, so a stock looks cheaper on this measure. A high P/E can mean investors expect strong growth, or that the shares are expensive. There is no universal good number: compare a stock with its sector and its own history.

When Stock Meadow ranks stocks, a lower figure scores better.

• A company that lost money has no meaningful P/E. Stock Meadow shows it as Loss, ranks it below every profitable company and never lets it pass a P/E filter.
• A very low P/E is not always a bargain. Profits at a cyclical peak, or one-off gains, can make a stock look cheap just before earnings fall.
• Sectors differ. Compare banks with banks and software with software before comparing across sectors.

How Stock Meadow handles gaps. Usually blank when earnings figures aren't available. A negative figure shows as Loss, ranks below every positive figure and never passes a filter.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Fixed-recipe models that score it: Trending Value (O'Shaughnessy).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

• Forward PEG Ratio: price vs. profit, adjusted for expected growth.
• Earnings Yield: operating profit for each dollar of the whole company.
• Price-to-Sales Ratio (P/S): what you pay for each dollar of sales.
• EV/EBITDA: whole-company price vs. operating cash earnings.

What is a good P/E ratio?

There is no single good P/E. Many investors treat a lower P/E as cheaper, but the right level depends on growth, risk and the sector. Compare a stock with its peers and its own history, and look at profit growth alongside it.

Why does a stock show Loss instead of a P/E?

When earnings over the last twelve months are negative, dividing the price by them gives a meaningless negative number. Stock Meadow labels it Loss and ranks it below every profitable company.

Is a higher or lower P/E better?

When Stock Meadow ranks stocks, a lower figure scores better. That is a ranking convention, so read P/E alongside other measures and compare similar companies.

Why is P/E blank for some stocks?

It is usually blank when earnings figures aren't available. Stock Meadow leaves the figure blank rather than guessing it.