The valuation ratios on a stock page

Just Stock Quotes, 28 September 2026

The Numbers section of a stock page opens with a short list of ratios: forward and trailing price to earnings, PEG, price to sales, price to book, enterprise value to EBITDA. They all try to answer one question, whether the stock is expensive or cheap for what you get, and each one answers it from a different angle. This guide explains what each ratio compares and when to trust it.

Why a ratio and not a price

A price on its own says nothing about value. A stock at eight hundred dollars can be cheap and a stock at eight can be dear, because the price is per share and companies have wildly different numbers of shares. A ratio divides the price by something the company produces, earnings or sales or assets, so that two companies can be compared on the same footing.

Price to earnings

The most quoted ratio. Price per share divided by earnings per share, or equivalently the whole company's market value divided by its annual profit. A P/E of twenty means you pay twenty dollars for each dollar of yearly profit; the company would take twenty years to earn back its price at today's rate.

Trailing P/E uses the last twelve months of reported earnings. Forward P/E uses analysts' estimates for the next twelve. Trailing is a fact and forward is a forecast; when they differ a lot, either earnings are expected to grow fast (forward lower) or to fall (forward higher).

A P/E is meaningless when earnings are near zero or negative, which is why it shows blank for many young companies, and it is misleading in the year of a one off gain or loss. It is also relative: fifteen is high for a utility and low for a software company, because the market pays more per dollar of profit when the profit is expected to grow.

PEG

P/E divided by the expected earnings growth rate, in percent. It tries to fix the growth problem: a P/E of forty is expensive for a company growing at five percent (PEG of eight) and ordinary for one growing at forty percent (PEG of one). The rough rule is that a PEG near one is fair. The catch is that the growth rate is a forecast, and forecasts of growth are the least reliable numbers in finance.

Price to sales

Market value divided by annual revenue. It works where P/E cannot: for companies with no profit yet, and for companies whose profit swings around. Sales are harder to fudge than earnings. But sales are not profit; a retailer turning over billions at a two percent margin deserves a much lower price to sales than a software company keeping thirty cents of every dollar. Compare it within an industry, never across.

Price to book

Market value divided by the company's net assets on its balance sheet, what would in theory be left if it sold everything and paid its debts. Below one means the market values the company at less than its books say it owns, which is either a bargain or a sign the books are optimistic. It is most useful for banks and insurers, whose assets are mostly financial and easy to value, and least useful for companies whose value is in brands, software and people, which do not appear on a balance sheet at all.

EV to EBITDA

Enterprise value is market value plus debt minus cash: what it would cost to buy the whole company and settle its borrowings. EBITDA is earnings before interest, taxes, depreciation and amortisation, a rough measure of the cash the operations throw off before financing and accounting choices. Dividing one by the other compares companies with very different levels of debt on a fair footing, which P/E cannot, because a company that borrowed heavily to buy back shares can show a flattering P/E and an ugly EV to EBITDA. Analysts and acquirers use this one most.

Reading them together

No single ratio settles anything. A stock with a low P/E and a high EV to EBITDA is carrying a lot of debt. A stock with a high P/E and a low PEG is expensive because it is growing. A stock with a low price to book and a high P/E is earning very little on a lot of assets. The ratios disagree in informative ways, and the disagreement is usually the story.

And every one of them is a snapshot of the last report, comparing today's price with yesterday's results. They tell you what you are paying for what the company has done. What it does next is the part nobody has a ratio for.