What is a good P/E ratio?

There is no universal good P/E ratio. Use the live S&P 500 reference as the broad-market anchor, then compare the company with sector peers, its own history, and expected EPS growth. A defensible P/E is one that the earnings outlook can support.

Is a high or low P/E better?

Neither is automatically better. A low P/E may signal value, but it may also reflect low growth, cyclicality, or stress. A high P/E can be justified by durable earnings growth and high returns, but it raises the risk of multiple compression if expectations fall.

What is a good P/E ratio for the S&P 500?

The current S&P 500 P/E changes with market prices and index earnings. Use the live benchmark table on this page when it is available instead of treating any single number as timeless.

Can a high P/E ratio still be reasonable?

Yes. A high P/E can be reasonable when earnings growth, margins, and returns on capital are durable enough to support the valuation. It is less defensible when the premium depends on temporary earnings strength or unusually optimistic forecasts.

P/E Ratio

June 17, 2026

Definition

The price-to-earnings (P/E) ratio compares a company's share price to its earnings per share, showing how much investors pay for each dollar of earnings.

The price-to-earnings ratio measures the market price of a share relative to the earnings attributable to that share. It divides share price by earnings per share, so the result is a multiple of current or expected earnings. A higher P/E usually means investors are assigning more value to future earnings power, while a lower P/E can reflect value, slower growth, cyclicality, accounting noise, or financial risk.

How to calculate it

Formula

P/E Ratio = Share Price / Earnings Per Share (TTM)

Example

Example frame: when a stock price rises faster than EPS, the P/E ratio expands. When EPS rises faster than the stock price, the P/E ratio contracts. Apple (AAPL) live stock page.

Price

$196.45

TTM EPS

$6.49

P/E ratio

30.3x

Benchmarks

P/E ranges differ sharply by sector because growth durability, margins, capital intensity, and cyclicality differ by business model. Start with the live S&P 500 benchmark, then judge the company against its sector and its own normal range.

Sector median P/E

Real Estate

35.6x

Technology

34.2x

S&P 500

28.5x

Consumer Discretionary

27.8x

Health Care

24.5x

Industrials

23.1x

Consumer Staples

22.1x

Utilities

19.6x

Materials

18.3x

Financials

16.2x

Energy

12.8x

Universe distribution

Histogram of trailing P/E across the investable universe. The highlighted bar marks the approximate market median.

Interpretation

How to read it

Compare the company P/E with its own historical range to see whether today's multiple is normal for that business model.
Compare it with the sector median and the S&P 500 reference below to separate broad-market valuation from company-specific valuation.
Check expected growth, margins, balance-sheet risk, and one-time items before treating a low P/E as attractive.

High vs low

A high P/E indicates that investors are paying a larger amount for each dollar of earnings, usually because they expect durable growth, high returns on capital, or lower business risk. That higher multiple also leaves less room for earnings disappointment. A low P/E can indicate undervaluation, but it can also signal deteriorating earnings, peak-cycle profits, high leverage, weak competitive position, or low reinvestment prospects. The conclusion should come from the spread versus peers, the company's historical range, and whether future EPS can support the multiple.

The PEG ratio adds growth context to the valuation.

Common trap

The cyclical trap: the lowest P/E in a cyclical business often appears near peak earnings, right before profits fall and the multiple stops looking cheap.

Reference

Extremes

Highest P/E

PLTRPalantir Technologies	214.6x
TSLATesla	142.3x
AXONAxon Enterprise	98.7x

Lowest P/E

FFord Motor	6.4x
CVXChevron	8.1x
CCitigroup	9.3x

Limitations

The P/E ratio is a starting point, not a verdict. Its main limits are:

Breaks with negative earnings. A company losing money has no meaningful P/E.
Ignores debt. Two firms with identical P/Es can have very different balance sheets.
Earnings can be distorted by one-time items, buybacks, or accounting choices.
Has no growth context. A high P/E can be reasonable for a fast grower and expensive for a no-growth company.

FAQs

Screen stocks by P/E ratio

Filter the market by valuation and compare companies in context.

Reviewed by Aidan McConnell, Founder of QuantLink