How to Calculate Price Earnings Ratiobr The CLEVER Guide to Calculate Price Earnings Ratio, br Price earnings ratio also known as PE ratio is a tool that is used by investors to help decide whether they should buy a stock. Essentially the PE ratio tells potential investors how much they have to pay for every 1 of earnings. A low PE ratio is attractive in the sense that one pays less for every 1 of earnings. At the same time companies with higher PE ratios generally expect higher earnings growth in the future than companies with low PEs. 1 X Research source The following article provides guidance on both calculating the PE ratio and using it to analyze stocks. Know the formula. The formula for calculating the pricebr Find the market price. Of the two variables used the PE equation market price is the easier to find. Market value per share is simply how much it costs to buy a share of any publicly traded company on the stock Market. On November 4 2015 for example it cost 103.94 to buy one share of Facebook. Find a stocks current price by searching onlibr Calculate or find the Earnings per share. Financial analysts generally use what is called a trailing PE ratio. In this case EPS is calculated by taking a companys net income over the last four quarters twelve months account for any stock splits and then dividing by the number of shares outstanding.