🔍 See what insiders are buying — free 7-day trial, no credit card required.
Get started →
Fundamentals
Understanding the P/E Ratio
The Price-to-Earnings (P/E) ratio is the most commonly cited stock valuation metric. It tells you how much you are paying for each pound of the company's annual earnings.
P/E Ratio = Share Price ÷ Earnings Per Share
What the Numbers Mean
A P/E of 15 means investors are paying £15 for every £1 of annual earnings. A P/E of 30 means they are paying £30 per £1 of earnings — twice as much for the same earnings power.
Benchmarks
Below 15
Potentially undervalued
Graham territory
Graham territory
15-25
Fair value range
for most stocks
for most stocks
Above 30
Growth premium
priced for perfection
priced for perfection
Limitations
The P/E ratio has significant limitations. It does not work for companies with no earnings (many growth stocks), it can be distorted by one-off charges or gains, and different industries have structurally different P/E ranges. Technology companies routinely trade at P/E 30+ while banks trade at P/E 8-12. Always compare within the same sector.