P/E Ratio
Price divided by earnings per share — what the market is paying for each dollar of profit.
Definition
The price-to-earnings ratio (P/E) is the most widely-cited valuation multiple in finance. It takes the stock price and divides by trailing-twelve-month earnings per share. A P/E of 20 means the stock is priced at 20 times its annual earnings.
A low P/E typically signals that the market expects slow growth or sees risk; a high P/E typically signals that the market expects fast growth or sees premium quality. Neither is automatically good or bad. A "cheap" P/E for a declining business can be a value trap; a "rich" P/E for a high-growth dominant business can be entirely justified.
TTM P/E uses the trailing twelve months of earnings — backward-looking. Forward P/E uses analyst estimates — forward-looking but subject to estimate optimism bias. Cyclically-adjusted P/E (CAPE, or Shiller P/E) averages earnings over ten years to smooth out business-cycle noise.
Formula
P/E = Price ÷ Earnings per shareHow QScoring uses it
P/E (TTM) is one of four metrics in the QScoring value category. Stocks with negative earnings get a fixed low score, since negative P/E is mathematically meaningful but practically unhelpful as a value signal. Everything else is z-scored against the sector with the sign inverted, so a low P/E maps to a high score. See the value section of the methodology.