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PER (Price Earnings Ratio) Explained

PER (Price Earnings Ratio) measures how many times a company's earnings per share (EPS) the current share price represents.

PER (times) = Share Price ÷ EPS (Earnings Per Share)

What it measures

PER shows how many times a company's annual earnings, expressed per share, an investor is paying for through the share price. For example, if the share price is ¥2,000 and EPS is ¥150, the PER is about 13.3x, meaning the share is trading at roughly 13.3 years' worth of per-share earnings.

How to read it

  • A low PER does not automatically mean a stock is "cheap," nor does a high PER automatically mean it is "expensive." Companies with higher growth expectations tend to trade at higher PERs.
  • Average PER levels differ significantly by industry, so comparisons are generally most meaningful within the same industry.
  • When EPS is negative, PER does not provide a meaningful reading.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Does a low PER always mean a stock is undervalued?
Not necessarily. Average PER levels vary widely by industry, and companies with lower growth expectations tend to have lower PERs. It is generally more useful to compare PER within the same industry or against a company's own historical range.
What is a typical PER level?
This varies by industry and market conditions. A level of around 15x is sometimes cited as a rough benchmark for the Japanese market overall, but this is only a general reference and does not guarantee anything about any individual company.
What does a negative PER mean?
If EPS (earnings per share) is negative (the company is loss-making), the resulting PER is also negative. In that case, PER is usually treated as "not meaningful" or "not applicable" as a valuation measure.

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