P/E ratio and earnings per share calculator

Two websites can give two different P/E ratios for the same company on the same day, and almost always for the same reason: one divides by the profit the company reported and the other by the «adjusted» figure. Here you see both at once.

Price per share — Reported net income — Adjustments the company adds back — Shares outstanding —

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The formula

P/E = price per share ÷ EPS · EPS = net income ÷ shares

How it is calculated

Earnings per share is net income attributable to ordinary shareholders divided by the weighted average number of shares. The P/E is the price per share divided by that EPS. With a share at €50, profit of €250M and 200 million shares: EPS is €1.25 and the P/E is 40 times.

The share count is a weighted average over the period, not the closing balance. That is why a buyback lifts EPS even when profit does not move, and an issue lowers it.

Reported versus adjusted, which is where the trouble comes from

Reported profit is what comes out of the audited accounts under IFRS or US GAAP. The «adjusted» figure is published by the company itself, adding back items it considers extraordinary: restructuring, impairments, the cost of shares granted to employees. It is not regulated, each company decides what to adjust, and it almost always results in higher profit and therefore a lower P/E.

With the €250M of the example and €60M of adjustments, adjusted EPS rises to €1.55 and the P/E falls from 40 to 32 times. The company has not changed; the denominator has. Mixing reported profit with an analyst consensus built on the adjusted figure is what manufactures earnings surprises that never happened.

What the P/E does not tell you

It does not tell you whether a share is cheap or expensive. A P/E of 8 can be a bargain or a company whose profits are about to collapse; one of 40 can be expensive or a company growing at 30 % a year. And with negative earnings it means nothing: that is why this calculator shows «n/a» and not a number, unlike tools that report something impossible to interpret.

Frequently asked questions

How is a stock's P/E ratio calculated?

P/E = price per share ÷ earnings per share. And earnings per share is net income attributable to ordinary shareholders divided by the weighted average number of shares. With a share at €50, profit of €250M and 200 million shares, EPS is €1.25 and the P/E is 40 times. It is always worth saying which earnings were used: the last twelve months, the last financial year, or the estimate for the next one.

Why do two websites give a different P/E for the same company?

Because they are not using the same earnings. One divides by profit reported under IFRS or US GAAP and the other by the «adjusted» figure the company publishes, adding back items it considers extraordinary. The period matters too: trailing twelve months, last closed financial year or next-year estimate give three different P/Es on the same day. Neither site is necessarily wrong; what is usually missing is a statement of which one they are using.

What happens to the P/E if the company loses money?

It does not apply. There is no multiple of a loss, so the P/E is left blank or marked «n/a». A negative P/E cannot be interpreted: it does not mean the share is cheap or expensive, only that the formula makes no sense with that denominator. For loss-making companies other multiples are used, such as EV/sales or EV/EBITDA when EBITDA is positive.

Other calculators

See the full definition · The article where it is measured on a real case

A calculation tool for informational purposes. It is not financial advice nor a recommendation to buy or sell, and its result depends entirely on the assumptions you enter.