Price-to-earnings ratio
A price-to-earnings ratio compares a company’s or stock’s market price with its earnings per share.
Investing for Programmers
A price-to-earnings ratio is a valuation ratio comparing a company's share price with its earnings per share.
- How it is used
- Uses P/E to assess stock valuation while building investment vocabulary and comparing companies.
- How deep it goes
- Defines the formula, compares baselines, distinguishes trailing and forward values, and defers complete judgment to broader analysis.
- Examples
- Uses NVIDIA, Pfizer, Walmart, Apple, Sempra, and Coca-Cola comparisons plus sector medians and historical averages.
- What you can do after
- Evaluate relative valuation with P/E, PEG, sector benchmarks, peer comparisons, and historical context without treating one ratio as decisive.
Read how Investing for Programmers explains price-to-earnings ratio →
Build a Robo-Advisor with Python (From Scratch)
A valuation ratio comparing a stock's market price with its earnings per share.
- How it is used
- Uses valuation changes to adjust historical stock-return estimates.
- How deep it goes
- Defines standard P/E through its earnings input, contrasts CAPE, and applies the adjusted measure in a regression workflow.
- Examples
- Uses VFINX stock returns, CAPE percentage changes, and regression of excess returns on valuation changes.
- What you can do after
- Evaluate how changing equity valuations may affect historical-return estimates.
Read how Build a Robo-Advisor with Python (From Scratch) explains price-to-earnings ratio →
Related concepts
- cyclically adjusted price-to-earnings ratiocontrasts with · The cyclically adjusted price-to-earnings ratio is a valuation metric that divides an asset's price by its average inflation-adjusted earnings over the preceding ten years.
- price/earnings-to-growth ratioused by · A price/earnings-to-growth ratio compares a company’s price-to-earnings ratio with its earnings growth rate.
- earnings per sharemeasures · Earnings per share is a company’s net income attributable to common shareholders divided by its outstanding common shares.
- financial ratiokind of · A financial ratio is a quantitative relationship between financial statement values used to evaluate financial condition, performance, or valuation.
- stock share pricemeasures · A stock share price is the market value of one share of a publicly traded company or security at a particular time.
- price-to-sales ratiomeasures · A price-to-sales ratio compares a company’s market value with its sales or revenue.
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