P/E, P/B, P/S Ratio Calculator (EPS, BPS, SPS)

Understanding the P/E, P/B and P/S ratio calculator — concept and principle

Valuation ratios compare a company's share price with what each share represents in earnings, net assets and sales. The price-to-earnings (P/E), price-to-book (P/B) and price-to-sales (P/S) ratios are the most widely quoted. This calculator computes the per-share figures EPS, BPS and SPS from company totals, the three ratios, the market capitalisation and the earnings yield.

How it is calculated

• EPS (earnings per share) = net income ÷ shares outstanding; P/E = price ÷ EPS.
• BPS (book value per share) = shareholders' equity ÷ shares; P/B = price ÷ BPS.
• SPS (sales per share) = revenue ÷ shares; P/S = price ÷ SPS.
• Market cap = price × shares; earnings yield = EPS ÷ price = 1 ÷ P/E.

Use figures for the same period (usually the last 12 months or the last fiscal year) and the same share count.

The principle

Each ratio asks how many units of currency investors pay for one unit of something the company provides. P/E prices profits: a P/E of 15 means paying 15 years of current earnings. P/B prices the accounting net assets, which suits banks and asset-heavy firms. P/S prices revenue and works even when profits are negative or temporarily depressed. Ratios are high when investors expect strong growth or see low risk, and low when they expect decline or see high risk, so a ratio is a summary of market expectations, not a verdict on value.

Worked example

Default inputs: price $120, 1,000,000 shares, net income $8,000,000, equity $50,000,000, revenue $90,000,000.

1. EPS: 8,000,000 ÷ 1,000,000 = $8.00; P/E = 120 ÷ 8 = 15.
2. BPS: 50,000,000 ÷ 1,000,000 = $50.00; P/B = 120 ÷ 50 = 2.4.
3. SPS: 90,000,000 ÷ 1,000,000 = $90.00; P/S = 120 ÷ 90 = 1.33.
4. Market cap: 120 × 1,000,000 = $120,000,000.
5. Earnings yield: 8 ÷ 120 = 6.67%.

How to read the result

Compare ratios with the company's own history and with peers in the same industry, because typical levels vary widely between sectors. A low P/E may signal a bargain or a business in trouble; a high P/E may reflect growth or over-optimism. A P/B below 1 means the market values the company below its book equity. The earnings yield can be compared roughly with bond yields as a starting point.

Common mistakes

• Mixing trailing earnings with forward prices, or annual with quarterly figures.
• Using a P/E when EPS is negative or close to zero, which makes it meaningless.
• Comparing P/B across industries with very different asset bases.
• Forgetting one-off gains or losses that distort net income.

Frequently asked questions

What is a "cheap" P/E?

It depends on growth, risk and sector; compare with peers and the company's own history.

What if EPS is negative?

P/E is not meaningful; look at P/S or other measures instead.

Which share count should I use?

Use the same basis throughout, ideally diluted shares outstanding for the period.

Sources: Graham, B. and Dodd, D., Security Analysis · CFA Institute, CFA Program Curriculum (equity valuation: price multiples)