Meaning
PE compares market price with earnings per share.
Formula
Share price / earnings per share
Practical reading
Low PE can mean cheaper valuation or weaker expectations; high PE can mean optimism or overvaluation.
Calculation detail
PE = share price / earnings per share. The same result can be calculated as market capitalization / net income when both figures refer to the same share class and period.
What to check
Compare forward-looking or trailing PE only like-for-like and within an industry. Lower PE may be attractive when earnings are durable; a higher PE can be justified by faster expected growth.
Limits and caveats
PE is not meaningful when earnings are negative or temporarily inflated by a one-off gain.