P/E ratio (price-to-earnings)
How many rupees investors pay for one rupee of annual profit.
Fundamental ratios
Live NSE examples below
What is P/E ratio?
The price-to-earnings ratio divides a company's share price by its earnings per share, or equivalently its market capitalisation by its annual net profit. A P/E of 20 means investors pay ₹20 for every ₹1 of yearly profit, or, turned around, the company earns 5% of its price each year (the earnings yield). It is the most quoted valuation number, and also the most misused.
Formula
P/E = share price ÷ EPS = market cap ÷ net profit (trailing 12 months)
Earnings yield = 1 ÷ P/E
Flash Finance: market cap uses the latest close × current share count; profit is the sum of the last four reported quarters
How to read it
- Compare P/E with the company's own history and its industry median, not with an absolute 'cheap' number.
- High P/E usually prices in high expected growth; low P/E often prices in expected decline.
- Cyclical companies look cheapest (low P/E) at the top of their profit cycle, which is often the worst time to buy them.
Common mistakes
- Comparing a bank's P/E with a software company's.
- Using P/E for loss-making companies. It is meaningless when earnings are negative.
Live: NSE stocks matching this today
Profitable companies with P/E below 12 185
| Stock | P/E | Industry P/E | ROE |
|---|---|---|---|
| PFCPower Finance Corporation Limited | 3.24 | 15.30 | 22.8% |
| VEDLVedanta Limited | 3.25 | 11.50 | 63.4% |
| SETLStandard Engineering Technology Limited | 3.45 | 43.90 | — |
| BBTCThe Bombay Burmah Trading Corporation Limited | 3.47 | 20.40 | 36.7% |
| MUKANDLTDMukand Limited | 3.51 | 15.10 | 40.3% |
| JSWDULUXJSW Dulux Limited | 3.53 | 22.30 | 15.1% |
| CHENNPETROChennai Petroleum Corporation Limited | 3.77 | 10.20 | 42.0% |
| PANAMAPETPanama Petrochem Limited | 3.96 | 11.50 | 45.6% |
Stocks cheaper than their industry P/E 129
| Stock | P/E | Industry P/E | ROE |
|---|---|---|---|
| JSWDULUXJSW Dulux Limited | 3.53 | 22.30 | 15.1% |
| BBTCThe Bombay Burmah Trading Corporation Limited | 3.47 | 20.40 | 36.7% |
| KMEWKnowledge Marine & Engineering Works Limited | 11.73 | 62.90 | 24.8% |
| DCMSHRIRAMDCM Shriram Limited | 10.06 | 53.40 | 16.4% |
| HMAAGROHMA Agro Industries Limited | 5.90 | 27.40 | 21.0% |
| KERNEXKernex Microsystems (India) Limited | 14.99 | 66.60 | 76.8% |
| ANTELOPUSAntelopus Selan Energy Limited | 17.62 | 77.20 | 23.1% |
| SAMHISamhi Hotels Limited | 7.30 | 28.00 | 22.9% |
Use it on Flash Finance
Frequently asked questions
What is a good P/E ratio for Indian stocks?
The Nifty 50 has spent most of the last decade between roughly 18 and 26 times trailing earnings, with brief excursions outside that range. A 'good' P/E depends on growth and return on capital: a company compounding profits at 25% with 30% ROE can justify a much higher multiple than a slow-growing utility.
Related concepts
PEG ratioP/E divided by the profit growth rate, to compare fast and slow growers.P/B ratio (price-to-book)Market value compared with the accounting value of shareholders' equity.ROE (return on equity)Annual profit as a percentage of the shareholders' money in the business.Dividend yieldThe annual dividend per share as a percentage of the share price.
