P/E ratio: what it is, how to calculate it, GAAP vs non-GAAP
P/E is the share price divided by earnings per share for the year. It shows how many dollars investors pay for one dollar of annual profit. Compare it with companies in the same industry and with the company's own history: software and banks have different norms.
Formula
or: market cap ÷ net income over 12 months
How to read it
- A high P/E means the market expects growth. Investors pay more for earnings they expect to grow fast.
- A low P/E is not always cheap. Sometimes the market expects earnings to fall, and a low P/E is a trap.
- GAAP or non-GAAP. GAAP is reported profit with all one-off items. Non-GAAP excludes write-downs, stock compensation and other ‘one-offs’, as management presents it. If the two differ a lot, find out why.
- No earnings, no P/E. A loss-making company has no P/E; then P/S or EV/EBITDA is used instead.
Live exampletrailing 12 months · data as of Nov 5, 2026
Where the columns are close, the company has few one-off items. A big gap means reported earnings are noticeably moved by write-downs or stock compensation.
Rows in the terminal
P/E GAAP (TTM) — price to reported earnings
The same ratio, but earnings are taken from the financial statements as they are, with every one-off loss and gain. Usually higher than Non-GAAP and fairer to the shareholder: write-offs and stock pay are real costs, just inconvenient ones.
P/E Non-GAAP (TTM) — price to adjusted earnings
How many years of earnings the stock costs, counting earnings the way management presents them: without write-offs, stock-based compensation and other one-offs. Analyst consensus is tied to these earnings, which is why companies are most often compared on this number.
Frequently asked questions
What P/E is normal?
There is no single norm. Historically the S&P 500 P/E averaged about 15–20, higher in recent years. Comparison within the industry matters more.
Why can P/E exceed 100?
Earnings are small relative to the price: either the market expects a sharp rise, or earnings temporarily fell.
Related terms
All 109 metrics for every stock, compared with its sector — in the terminal
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