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What a P/E ratio is

Price divided by earnings per share: how it's worked out, where the earnings figure comes from, and what the ratio leaves out.

The short answer

A P/E ratio is a company's share price divided by its earnings per share (EPS). It says how many dollars the market is paying for each $1 of the company's yearly profit per share. Apple's diluted EPS for fiscal 2025 was $7.46, so Apple's P/E on that year's earnings is today's share price divided by $7.46.

The formula

P/E ratio = share price ÷ earnings per share

The price is the current market price of one share. The earnings per share come from the company's own results: net income for the common shareholders divided by the average number of shares. A P/E of 20 means the price is 20 times one year of earnings per share.

Ticker Sage doesn't publish share prices. The P/E calculator takes a price you type and divides it by diluted EPS from the latest 10-K of any covered company.

Where the E comes from

Every 10-K reports earnings per share at the bottom of the income statement, in two versions: basic and diluted. Diluted EPS counts the extra shares that stock options, restricted stock and convertible securities could add, so it's the more conservative of the two and the one most P/E figures use. Earnings per share, basic and diluted explains the difference.

Apple's 10-K for fiscal 2025, the year ended Sep 27, 2025, reports diluted EPS of $7.46.

Source: Apple 10-K for fiscal 2025, filed Oct 31, 2025

Trailing, forward and fiscal-year P/E

Fiscal-year P/E divides the price by EPS for the last full fiscal year, straight from the 10-K. That's what the calculator here uses.
Trailing P/E (often written TTM, for trailing twelve months) adds up the last four quarters of EPS, so it mixes the 10-K with the 10-Qs filed since.
Forward P/E divides by analysts' estimates of next year's EPS. Those estimates aren't in any filing, and they can turn out far from what the company later reports.

The three can differ a lot for the same company on the same day, so it helps to know which one a quoted P/E is.

The ratio moves when earnings move

A P/E changes even when the share price stands still. Micron's diluted EPS went from $7.59 in fiscal 2025 to $74.33 in fiscal 2026, about 10 times as much. At any single share price, the P/E based on fiscal 2026 earnings is about 10% of the P/E based on fiscal 2025. Companies whose profits swing with a business cycle, such as memory chipmakers, can show a very high P/E after a weak year and a low one after a strong year.

Source: Micron 10-K for fiscal 2026, filed Oct 9, 2026

When there's a loss

Intel reported diluted EPS of −$0.06 for fiscal 2025. Divide a price by a negative number and you get a negative P/E, which doesn't measure anything useful. Data sites usually show "n/m" (not meaningful) or leave it blank, and the calculator does the same.

Source: Intel 10-K for fiscal 2025, filed Jan 23, 2026

What a P/E leaves out

Debt and cash. Two companies with the same P/E can carry very different amounts of debt. Market cap and enterprise value covers the measures that include it.
Growth. The ratio uses one year of earnings. It says nothing on its own about whether earnings will grow or shrink.
One-time items. A big gain or charge in one year changes EPS, and so the P/E, without any change in the underlying business.
Industry. Banks, utilities, software companies and retailers have long traded at very different P/E levels, so comparisons across industries say little.

A high or low P/E isn't good or bad on its own. It reflects what buyers were willing to pay for a year of earnings at that moment.

Common questions

What is a good P/E ratio?

There isn't one. P/E levels vary by industry, by how fast earnings are changing and by interest rates, and the same P/E can mean different things for different companies. Comparing a company with its own past or with close peers, and knowing which earnings were used, tells you more than any single cut-off.

Which EPS should I use for a P/E?

Most published P/E ratios use diluted EPS. Apple's diluted EPS for fiscal 2025 was $7.46, slightly below its basic EPS of $7.49. Source: Apple 10-K for fiscal 2025.

What does a negative P/E mean?

It means the company lost money over the period, so EPS is below zero. A negative P/E isn't a meaningful measure, which is why most sites show n/m. Intel's diluted EPS for fiscal 2025 was −$0.06. Source: Intel 10-K for fiscal 2025.

What is the earnings yield?

It's the P/E turned upside down: EPS divided by the share price, shown as a percentage. A P/E of 20 is an earnings yield of 5%. Some readers find it easier to compare with interest rates. The P/E calculator shows both.

Why do banks often have lower P/E ratios than software companies?

Banks' profits depend on interest rates and loan losses and have grown more slowly over long periods, while many software companies have grown earnings quickly. Buyers have paid more per dollar of earnings for faster expected growth. JPMorgan Chase's diluted EPS for fiscal 2025 was $20.02. Source: JPMorgan Chase 10-K for fiscal 2025.

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Oct 25, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Oct 26, 2026

General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.

More in Learn and Tools · Methodology & Disclosures explains where every number comes from.