How to Calculate the Price to Earnings Ratio

The price-to-earnings ratio is obtained when you a company’s current stock price divided by its earnings per share. The calculation can be based on average or daily rates, which can influence the P/E depending on the scale chosen. Earnings forecasts by analysts can also be used to calculate P/E ratios. Such estimates only indicate a trend. However, since the future is traded on the stock exchanges, it can make sense to rely on forecast profits as the basis for the P/E rather than looking at past surpluses, which are more used for historical comparison.