Glossary
Price-to-earnings ratio: meaning, example and why it matters
Also called P/E: the share price divided by earnings per share over the last twelve months. It shows how many rupees the market is paying today for each rupee of the past year's profit.
Worked example
A share at ₹300 with earnings per share of ₹15 has a P/E of 300 ÷ 15 = 20. A loss-making company has negative earnings and no meaningful P/E.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
P/E puts price in terms of past profit, so companies of different sizes can be compared, ideally within the same sector.
Related terms
See it in practice
Frequently asked questions
Is a low P/E good?
It only means the price is low relative to past earnings. It can reflect slower growth, higher risk or one-off profits, so it is compared among similar companies rather than read alone.
Is this page investment advice?
No. Price-to-earnings ratio is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.