Choose Per-Share mode (Price + EPS) or Aggregate mode (Market Cap + Net Income). Optional inputs for forward earnings, growth rate and industry enable PEG ratio and valuation verdict.
Price & Earnings (Per-Share)
Current market price (CMP) on BSE / NSE.
Earnings Per Share over last 12 months. From annual report or quarterly disclosures.
Analyst estimate for next 12 months. Used to compute Forward P/E.
Expected annual EPS growth %. Used to compute PEG ratio.
Market Cap & Net Income (Aggregate)
Share Price × Shares Outstanding. From BSE/NSE.
Profit After Tax over last 12 months from P&L.
Estimated next 12 months. Used for Forward P/E.
Expected annual NI growth. Used for PEG.
Industry Benchmark — Optional
Drives valuation verdict and benchmark comparison.
Trailing P/E Ratio
0.00x
Calculation Basis
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The P/E ratio is the most widely cited equity valuation metric — almost every financial news report quotes it. The basic version is simple, but a sophisticated investor uses multiple variants to triangulate fair value.
The Four Formulas
Trailing P/E = Current Market Price ÷ Trailing 12-month EPS
Forward P/E = Current Market Price ÷ Estimated next 12-month EPS
PEG Ratio = P/E Ratio ÷ Earnings Growth Rate (in %)
Earnings Yield = EPS ÷ Price = 1 ÷ P/E (expressed as %)
Why Each Variant Matters
Trailing P/E — uses audited historical numbers. Most reliable but backward-looking. Standard in most stock screening
Forward P/E — uses analyst estimates. More relevant for investment decisions but vulnerable to forecast bias. Typically lower than trailing for growing companies
PEG Ratio — adjusts P/E for growth. A 30x P/E company growing 30% has PEG 1.0; same P/E with 5% growth has PEG 6.0. PEG less than 1.0 suggests undervaluation; greater than 2.0 suggests overvaluation
Earnings Yield — directly comparable with bond yields. When 10-year G-Sec yields 7% and a stock yields 4%, the stock is expensive relative to risk-free alternatives
The Justified P/E Formula
Through the Gordon Growth Model, the P/E ratio that fundamentally fits a company can be derived:
Justified P/E = Payout Ratio × (1 + g) ÷ (r − g)
where: g = expected long-term growth rate
r = required equity return (Cost of Equity)
For a company with 50% payout, 5% growth, 12% required return: Justified P/E = 0.5 × 1.05 ÷ 0.07 = 7.5x. For high-growth profile (15% growth, same parameters): Justified P/E = 0.5 × 1.15 ÷ (-0.03) = mathematically unstable when growth approaches required return.
P/E is meaningless for negative earnings. Loss-making companies (many tech startups, turnaround firms, cyclical businesses in downturn) cannot be valued using P/E. Use alternative metrics: Price-to-Sales (P/S), Price-to-Book (P/B), EV/EBITDA, or DCF. The calculator alerts users when EPS or Net Income is non-positive.
Sector P/E Benchmarks — Indian Markets
P/E ratios vary substantially by sector due to different growth profiles, capital intensity, regulatory regimes, and risk. The following ranges are indicative — individual companies may trade at substantial premiums (high growth, strong moat) or discounts (governance concerns, cyclical downturn).
Sector
Typical P/E
Drivers
IT / Software
25-35x
High margins, scalable revenue, low capex
FMCG / Consumer
35-50x
Brand premium, predictable cash flows, defensive
Pharma
25-35x
Patent moats, regulated pricing, R&D intensity
Private Banks
15-25x
Asset growth, fee income, NIM, credit quality
PSU Banks
6-12x
Government ownership, NPA legacy, slower growth
Manufacturing
18-25x
Capacity utilisation, commodity cycles, capex
Auto
15-25x
Cyclicality, EV transition, raw material volatility
Real Estate
18-30x
Project execution, regulatory cycles, leverage
Energy / Power
8-15x
Regulated tariffs, capital intensity, ESG concerns
Telecom
18-30x
Tariff cycles, ARPU trends, network capex
Nifty 50 (Broad)
18-25x
Index of large diversified companies
Reading the Benchmarks
Premium to peer P/E often signals high growth, dominant market position, or speculative excess
Discount to peer P/E often signals weaker growth, governance issues, or undervaluation opportunity
Convergence over time — companies trading at substantial premiums or discounts typically converge to peer median over 18-36 months
Cyclical sectors (auto, real estate, energy) show wide P/E ranges across cycles — averages mislead during peak or trough phases
BSE and NSE publish daily index P/E data. SEBI Listing Regulations require P/E disclosure in IPO red herring prospectuses with peer comparison. Schedule III ratio disclosure under ICAI guidance includes Net Profit Ratio and Return on Investment, with 25%+ variance explanation. The Companies Act framework is at India Code with MCA filings.
P/E Variants & Related Metrics
Beyond the four primary variants computed above, sophisticated valuation uses several P/E adaptations and complementary metrics.
Metric
Formula
When to Use
Trailing P/E (TTM)
Price ÷ EPS (TTM)
Most common; uses reported earnings
Forward P/E
Price ÷ Estimated EPS
Investment decisions; uses estimates
PEG Ratio
P/E ÷ Growth %
High-growth stocks; growth adjustment
Earnings Yield
1 ÷ P/E
Comparison with bond yields
CAPE / Shiller P/E
Price ÷ 10-yr avg inflation-adjusted EPS
Index/market valuation; smooths cycles
Adjusted P/E
Price ÷ EPS (excl. one-time items)
Cleaner recurring earnings basis
EV/EBITDA
Enterprise Value ÷ EBITDA
Capital structure neutral; cross-sector
Price-to-Book (P/B)
Price ÷ Book Value per Share
Banks, asset-heavy businesses
Price-to-Sales (P/S)
Price ÷ Sales per Share
Loss-making or early-stage companies
Tax Regime Impact on P/E
Tax regime changes directly affect EPS and therefore P/E. India's Section 115BAA new regime (22% base, ~25.17% effective with surcharge and cess) reduces tax burden for opted companies versus old regime (~33% effective). The 2019 corporate tax cut led to immediate EPS increases and P/E re-rating across sectors. Section 115BAB manufacturers (15% base, ~17.16% effective) enjoy further benefits. When comparing P/E across years or across companies on different tax regimes, examine pre-tax P/E (Price ÷ EBT per Share) for cleaner comparison. The Deferred Tax Calculator helps quantify tax regime impact on earnings.
P/E for unlisted companies: Unlisted companies do not have market prices, so P/E is computed using comparable company analysis — apply the average P/E of listed peers to the unlisted company's earnings. This is the standard valuation technique for IPO pricing under SEBI Listing Regulations and M&A advisory work. Discounts of 20-30% are typically applied for illiquidity and lack of disclosure.
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The Price-to-Earnings (P/E) ratio is the most widely used equity valuation metric. It is calculated as Market Price per Share divided by Earnings per Share (EPS), or equivalently Market Capitalization divided by Net Income. P/E represents the rupees an investor is willing to pay for each rupee of annual earnings. A P/E of 25x means investors pay ₹25 today for every ₹1 of current annual earnings. P/E is the standard valuation benchmark for listed companies, IPOs, and comparable company analysis.
There is no universal good P/E — interpretation depends on industry, growth rate and market conditions. Nifty 50 historically averages 18-25x. High-growth sectors (IT, FMCG, Pharma) trade at 25-50x. Mature sectors (PSU banks, energy, manufacturing) trade at 8-18x. A company with P/E significantly below industry peers may be undervalued or facing fundamental issues. Compare P/E against the company's historical range, industry peers, and growth prospects rather than absolute thresholds.
Trailing P/E uses actual reported earnings of the last 12 months (TTM) — current price divided by historical EPS. Forward P/E uses analyst estimates of next 12 months earnings — current price divided by estimated future EPS. Forward P/E is typically lower than trailing P/E for growing companies (since estimated earnings exceed historical). Trailing is more reliable as it uses audited numbers; forward is more relevant for valuation decisions. Quality investors examine both for trend analysis.
PEG Ratio = P/E Ratio ÷ Earnings Growth Rate (in percent). It adjusts P/E for growth — a high P/E is justified if earnings are growing fast. PEG below 1.0 suggests undervaluation relative to growth; 1.0-2.0 fair value; above 2.0 overvalued. Popularised by Peter Lynch, PEG is particularly useful for high-growth stocks where standalone P/E looks expensive. A company at 30x P/E with 25% growth has PEG 1.2 (fair); same P/E with 5% growth has PEG 6 (very expensive).
Earnings Yield is the inverse of P/E ratio, expressed as a percentage. Earnings Yield = EPS ÷ Price = 1 ÷ P/E. A P/E of 25x equals an earnings yield of 4%. Earnings yield enables direct comparison with bond yields — when 10-year G-Sec yield is 7% and a stock's earnings yield is only 3%, the stock may be expensive relative to risk-free alternatives. The Fed Model uses earnings yield versus bond yield to assess overall market valuation.
P/E ratio is mathematically meaningless for companies with negative earnings (losses). The result would be negative or undefined. For loss-making companies, alternative valuation metrics are used: Price-to-Sales (P/S), Price-to-Book (P/B), Enterprise Value to EBITDA (EV/EBITDA), or Discounted Cash Flow (DCF). Many tech startups and turnaround companies report negative earnings but trade at high valuations — these require forward-looking metrics rather than historical P/E.
IT and software 25-35x, FMCG 35-50x, Pharma 25-35x, Private banks 15-25x, PSU banks 6-12x, Manufacturing 18-25x, Auto 15-25x, Real Estate 18-30x, Energy and Power 8-15x, Telecom 18-30x. These are approximate ranges based on sector medians; individual companies may trade at substantial premiums (high growth) or discounts (governance concerns). Always compare against listed peers in the same sector with similar growth and risk profiles for meaningful insight.
Banks trade at lower P/E ratios than non-financial companies for several reasons: leverage-driven business model carries higher risk, regulatory capital requirements limit growth, asset quality is opaque (NPA hidden until recognised), credit cycles create earnings volatility, and government ownership (in PSU banks) creates governance discounts. Private banks typically trade at 15-25x; PSU banks at 6-12x. Bank valuation often uses Price-to-Book Value (P/B) alongside P/E given the importance of equity book value in Basel III framework.
Higher earnings growth justifies higher P/E ratios. The Gordon Growth Model relationship: Justified P/E = Payout Ratio × (1 + g) ÷ (r − g), where g is growth rate and r is required return. A 5% growth company with 10% required return justifies P/E around 17x. A 15% growth company justifies P/E around 35x at the same payout. PEG ratio (P/E ÷ growth) is the practical shortcut — PEG of 1.0 typically signals fair value across growth profiles.
P/E has several limitations: it relies on accounting earnings vulnerable to manipulation; ignores capital structure (highly leveraged firms inflate EPS); does not capture growth, risk, or quality differences; produces meaningless results for negative earnings; and uses point-in-time data subject to cyclical noise. P/E should be used alongside PEG (growth adjustment), EV/EBITDA (capital structure neutral), Price-to-Book (asset basis), Free Cash Flow yield, and qualitative business analysis for complete valuation.
Tax regime changes directly affect EPS and therefore P/E. India's Section 115BAA new regime (22% base, ~25.17% effective) reduces tax burden for opted companies versus old regime (30% base, ~33% effective). The 2019 corporate tax cut led to immediate EPS increases and P/E re-rating across sectors. Section 115BAB manufacturers (15% base, ~17.16% effective) enjoy further benefits. When comparing P/E across years or companies on different tax regimes, examine pre-tax earnings (P/E based on EBT) for cleaner comparison.
SEBI Listing Regulations require IPO red herring prospectus to disclose company P/E versus listed peer companies in the comparable industry. The book-building process uses peer P/E as a benchmark — IPO pricing typically targets 5-15% discount to listed peer median P/E to attract investors. Highly anticipated IPOs may price at premium to peers. Pre-IPO investors and merchant bankers use P/E-based valuation alongside DCF and EV/EBITDA. Post-listing, the P/E typically converges to peer average within 12-18 months.
Reported P/E uses statutory net income from financial statements per Schedule III. Adjusted P/E excludes one-time items: exceptional gains or losses, impairment charges, restructuring costs, gains on asset sales, and tax windfalls. Adjusted earnings provide a cleaner picture of recurring profitability for valuation. SEBI requires reconciliation between reported and adjusted figures in earnings releases. For comparable company analysis and forward valuation, adjusted P/E is generally preferred as it normalises for non-recurring items.