What Is P/E (TTM) and What Counts as a High or Low P/E Ratio?
Price divided by the last 12 months of earnings — what you pay per unit of profit. It only means something compared with peers, which is why we show the industry percentile.
P/E (TTM) — the trailing twelve-month price-to-earnings ratio — is what you pay for one unit of the company's annual profit. A P/E of 15 means the share price is fifteen times the earnings per share the company reported over the last four quarters. "TTM" simply says those earnings are the most recent twelve months actually reported, not a forecast.
How it is calculated
- Earnings per share (TTM) = net profit over the last four reported quarters, divided by shares outstanding.
- P/E (TTM) = share price divided by EPS (TTM).
Equivalently, market capitalisation divided by the last twelve months of net profit. The ratio updates every day with the price and jumps once a quarter when a new report replaces the oldest one. When earnings are zero or negative the ratio is undefined; Stock Compass shows no P/E rather than a misleading negative number. Because accounting standards and growth rates differ across industries, a raw P/E is not comparable across sectors — which is why the app also computes a sector percentile: where this stock's P/E ranks among companies in the same sector.
Rules of thumb
| P/E (TTM) | What it usually means |
|---|---|
| Below 10 | Cheap on earnings, or the market expects profits to fall (common in cyclicals and banks) |
| 10 to 20 | Typical for mature, steadily profitable companies |
| 20 to 35 | The market is paying for expected growth |
| Above 35 | High growth expectations, or depressed one-off earnings |
| Sector percentile below 30 | Cheaper than about 70% of peers |
| Sector percentile above 70 | More expensive than about 70% of peers |
Absolute bands are conventions and shift with interest rates and market mood. The percentile is the more useful comparison because it holds the industry constant.
What it does not tell you
- Whether earnings will persist. A cyclical at the top of its cycle shows a low P/E precisely when profits are about to fall. The app flags cyclical sectors for this reason.
- Balance-sheet risk. Two companies with identical P/E can carry very different debt loads. See liabilities to assets.
- Quality of the E. One-off gains, write-downs and buybacks all move EPS without changing the underlying business.
In Stock Compass
P/E appears in the fundamentals row of the stock card, next to PB and ROE; hovering shows the sector percentile. In the card verdict, the valuation section reads the percentile, not the raw number: below the 30th percentile adds a positive note ("cheaper than about x% of peers"), above the 70th adds a caution, in between is neutral. If the sector is cyclical the verdict adds a separate warning that a low P/E does not necessarily mean cheap. P/E (TTM) also feeds the fair value model: EPS derived from it is multiplied by a sector-adjusted fair P/E to produce one of the model's estimates.
In the strategy builder there are two related indicators from different data sources: pe (Valuation group, from the quote feed, default pe < 15) and pe_ttm (Fundamentals group, from the fundamentals feed, default pe_ttm < 20). Their values can differ slightly; for fundamental screens the builder recommends pe_ttm. pe_industry_pctile < 30 expresses the peer comparison directly. Since the E changes with every report, the guide Hold through earnings or sell? is a useful companion.
FAQ
What does TTM mean?
Trailing twelve months — the sum of the last four reported quarters. It uses real, reported earnings, unlike forward P/E, which divides price by analysts' forecast of next year's earnings.
Why does the card show no P/E for some stocks?
Because the company reported a loss over the last twelve months, so earnings are zero or negative and the ratio has no useful meaning. Loss-making growth stocks are often compared on price-to-sales instead.
Is a P/E of 8 cheap?
On its own you cannot tell. Banks and shipping companies often trade at single-digit P/E because the market expects earnings to be volatile. The sector percentile answers the question that matters: cheap compared with whom?
Why are there two P/E indicators in the builder?
They come from different data feeds — pe from the quote source and pe_ttm from the fundamentals source — and can disagree by a little. Pick one and use it consistently; for fundamental screens the app suggests pe_ttm.
Definition only — not investment advice.