What is the P/E ratio?
P/E stands for price/earnings — price divided by earnings. The number tells you how many years of profit you pay for the stock. A P/E of 15 means the share costs 15 times what the company earns per share in one year.
The tall bar is the price, the small one is one year of profit. P/E is how many small bars fit into the tall one.
How it is calculated
Take the share price and divide by the company's earnings per share (EPS). That is the whole calculation.
Example: A share costs 300. The company earns 20 per share a year. 300 ÷ 20 = P/E 15. You pay 15 years of profit to own it — if the profit stays as it is.
You never need to calculate it yourself. The figure is on practically every stock page, and in Kiggo it comes with an explanation.
How to read it
There is no "right" P/E. The number says something about what the market expects:
- Low P/E (say under 10): The stock is cheap relative to what the company earns right now. It may be a bargain — or the market expects profit to fall. It is often the latter.
- Mid P/E (about 12–20): Typical for a solid company without drama.
- High P/E (say over 30): You pay many years of profit. The market expects strong growth — and is disappointed if it does not come. Growth and tech stocks often sit here.
The most important thing: only compare within the same industry. A bank and a software company have completely different "normal" levels. A bank at P/E 8 is not necessarily cheaper than a software company at P/E 25.
When the number cannot be used
If the company makes a loss, there is no P/E — you cannot divide by a negative. Then you typically see a dash or "n/a". That is not an error; it just means you need to look at other figures, such as P/S.
And an extremely low number (under 2–3) is almost never a bargain. It usually happens when the price has collapsed because the market knows something that is not yet in the accounts.
The typical beginner's mistake
Buying a stock because the P/E is low. A low P/E often means the market expects worse times — it is a warning as often as it is a discount. Always ask why it is cheap. And only compare with companies that do the same thing.
How you see it in Kiggo
Look up a stock in Kiggo and tap "Show key figures — what does the stock actually cost?" and you get more than the number. Kiggo writes it as a sentence: "You pay about 15 years of profit for the stock. That is a normal level." — or warns if the figure is extremely low or high. You also see the expected P/E for next year and the dividend. If a figure looks too good to be true, Kiggo says so.
Related terms
Frequently asked questions
What is a good P/E?
There is no single good number. For solid, mature companies 12–20 is typical; growth companies often sit above 30, banks and industrials often below 12. Only compare within the same industry — and always ask why the number is what it is.
What does it mean if the P/E is negative or missing?
The company is making a loss, so the figure cannot be calculated. Look instead at P/S (price to sales) and at whether the company is heading towards profit.
Is a low-P/E stock cheap?
Only relative to the profit the company has right now. If the market expects profit to fall, a low P/E is a warning — not a discount. Extremely low numbers (under 2–3) are usually a danger sign.
What is the difference between P/E and PEG?
PEG is P/E divided by expected earnings growth. It allows for the fact that a high P/E can be fair if the company grows fast. Around 1 is considered fair.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-07.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
