Three Numbers
Price alone tells you nothing. Three numbers do: what you pay for a dollar of profit today, what you pay for next year's, and whether growth justifies the premium. Type a ticker and the page builds them in front of you, from live data, with the ranges to use and the traps to avoid.
Overview
A $5 stock can be massively overpriced and a $500 stock can be a bargain. The share price is the size of the slice; it says nothing about how much the company earns per slice. Every metric on this page compares the price of one share with the profit of one share: P/E on last year's profit, forward P/E on next year's expected profit, and PEG, the forward P/E divided by the expected growth rate.
The tool below pulls price, trailing EPS, expected EPS and expected growth for any ticker from live market data, recomputes the three numbers, and gives each a verdict against the ranges from the guide. Every input can be overwritten by hand, the growth assumption has a slider because it is the shakiest number of the three, and two stocks can be read side by side. The ranges are rules of thumb for large, established companies; sectors differ.
Run the numbers
One ticker, or two to compare. Symbols as Yahoo writes them: ASML.AS, SHEL.L.
1. The P/E
ratio
Share price divided by earnings per share over the last twelve months. How much you pay today for one dollar of profit. A P/E of 20 means $20 for every $1 the company earned last year. All else equal, lower is cheaper; all else is rarely equal, which is why the next two numbers exist.
| P/E | Reading |
|---|---|
| under 15 | Cheap. Either a bargain or the market expects earnings to shrink. |
| 15 to 25 | Fair value for a steady, mature business. |
| 25 to 40 | Pricey. You are paying for growth that still has to arrive. |
| over 40 | Expensive. Only justified by fast, durable growth. |
Negative earnings
No P/E. The metric is meaningless for loss-making companies; the page says "no earnings" instead of a number.
One-off years
A single year's profit can be distorted by one-offs. Check whether last year was normal before trusting the multiple.
Cyclicals and sectors
Cyclicals look cheapest at the top of the cycle, when earnings peak. Software runs higher, banks and utilities lower: compare with the sector and the stock's own history first.
2. Forward
P/E
Same idea, but on the earnings analysts expect next year. Markets price the future, not the past. If earnings are expected to grow, the forward P/E is lower than the trailing one, and the gap tells you how much growth is already assumed.
Forward well below trailing
Strong growth expected. Ask whether it is realistic, and where the estimate comes from.
Forward close to trailing
Little growth expected. The stock has to be cheap on today's numbers.
Forward above trailing
Earnings expected to fall. Be careful with a "cheap" trailing P/E.
A forecast is a forecast
Analysts are systematically too optimistic, especially two years out, and estimates get revised. Use one source for both stocks you compare; estimate methods differ.
3. The PEG
ratio
The forward P/E divided by the expected annual EPS growth rate, as a plain number: 28% growth is 28. It answers the real question: is the premium justified by how fast profit grows? A PEG of 1 means one point of P/E for every point of growth.
Growth is the shakiest input
Use a 3 to 5 year expected EPS growth rate, not one heroic year. Where Yahoo has no 5-year estimate the page derives the rate from the consensus PEG and says so under the input.
Slow growers break it
A 3% grower at a P/E of 12 shows PEG 4 and can still be fine. The ratio is built for growth stocks.
It ignores risk and quality
Two companies at PEG 1.5 can be very different investments. Debt, cash flow and pricing power are not in the number.
Putting it
together
The three numbers do not tell you which bet is right. They tell you which bet you are making. What they leave out: the balance sheet (debt, cash, surviving a bad year), cash flow (reported earnings and actual cash can drift apart for years), the quality of the business (margins, pricing power, competition), and the reason a stock is cheap. A low multiple is a question, not an answer.
MARKET DATA: YAHOO FINANCE, REFRESHED HOURLY. FORECASTS ARE ANALYST CONSENSUS AND CHANGE. EDUCATION, NOT FINANCIAL ADVICE.