Stock Valuation Ratios Calculator

Last updated: 2026-05-19

Stock valuation ratios

Stock valuation ratios are standardized metrics that relate a company's market price to its underlying financial fundamentals — earnings, book value, and dividends. Because they normalize for company size and currency, they allow a $10 stock to be compared against a $500 stock, or a company in one country against a company in another.

This calculator computes six key ratios from four per-share inputs:

$\text{P/E} = \frac{P}{EPS}, \quad \text{P/B} = \frac{P}{BVPS}, \quad \text{ROE} = \frac{EPS}{BVPS}$

$\text{Dividend Yield} = \frac{DPS}{P}, \quad \text{Payout Ratio} = \frac{DPS}{EPS}, \quad \text{Earnings Yield} = \frac{EPS}{P}$

where $P$ is share price, $EPS$ is earnings per share, $BVPS$ is book value per share, and $DPS$ is dividends per share.

P/E ratio — what investors pay for earnings

The price-to-earnings ratio is the most widely cited valuation metric. A P/E of 15 means investors are paying $15 for every $1 of annual earnings — roughly, the investment is recovered in 15 years at current profitability.

Typical ranges vary significantly by sector:

A company with negative earnings (a loss-making year) has no meaningful P/E. This is why this calculator requires EPS > 0.

Trailing vs. forward P/E: Trailing P/E uses actual earnings from the past 12 months; forward P/E uses analyst estimates for the next 12 months. Trailing P/E is factual; forward P/E depends on forecast accuracy.

P/B ratio — price versus book value

The price-to-book ratio compares market value to accounting net worth. A P/B of 2.0 means investors are paying twice what the balance sheet says the company is worth — the extra dollar reflects intangible value: brand, patents, customer relationships, and expected future returns.

• P/B < 1 — stock trades below net asset value; often signals low profitability, distress, or pessimism about asset quality
• P/B = 1 — market values the company at exactly its book value
• P/B > 1 — market assigns value beyond book; typical for profitable businesses

Banks and insurance companies are naturally compared by P/B because their assets are financial instruments with known market values. Software and services companies are less meaningful because human capital and software do not appear on the balance sheet.

ROE — how efficiently equity generates earnings

Return on equity measures the percentage of shareholders' equity that is turned into net income each year. From per-share figures: ROE = EPS / BVPS, which equals net income / total shareholders' equity.

A 15% ROE means the company earned $0.15 for every $1 of equity. A 15% ROE is a commonly cited minimum screen for quality companies. ROE can be inflated by debt, however, because high leverage reduces the equity base, so it is best read alongside debt-to-equity ratios.

Dividend yield and payout ratio

Dividend yield expresses how much income a share returns per dollar invested:

$\text{Dividend Yield} = \frac{\$1.50 \text{ DPS}}{\$50 \text{ price}} = 3\%$

A 3% yield returns $3 per year for every $100 invested — before any price appreciation or decline.

Payout ratio indicates how sustainable that dividend is:

$\text{Payout Ratio} = \frac{\$1.50 \text{ DPS}}{\$4.00 \text{ EPS}} = 37.5\%$

A 37.5% payout ratio means 37.5% of earnings go to dividends and 62.5% are retained — healthy room to maintain or grow the dividend. A ratio above 100% means dividends exceed earnings, which is unsustainable without drawing on reserves or debt.

Earnings yield — comparing stocks to bonds

Earnings yield (E/P) is the reciprocal of P/E, expressed as a percentage. At a P/E of 12.5, the earnings yield is 8.0% — for every $100 invested, $8 is attributable to earnings.

This percentage can be compared directly to bond yields. If the 10-year Treasury yields 4.5% and stocks offer an 8% earnings yield, equities provide a 3.5 percentage point premium — the equity risk premium. When this spread narrows, stocks become relatively expensive compared to safer fixed income.

Worked example

Company: a mid-cap industrial manufacturer

• Share price: $47.80
• EPS (TTM): $3.85
• BVPS: $22.40
• DPS (annual): $1.20

Calculated ratios:

• P/E = 47.80 / 3.85 = 12.4× — below historical averages, suggesting modest valuation
• P/B = 47.80 / 22.40 = 2.13× — premium to book, reflecting goodwill and intangibles
• ROE = 3.85 / 22.40 = 17.2% — above the 15% Buffett threshold
• Dividend Yield = 1.20 / 47.80 = 2.5% — moderate income return
• Payout Ratio = 1.20 / 3.85 = 31.2% — well covered; room to grow the dividend
• Earnings Yield = 3.85 / 47.80 = 8.1% — attractive compared to a 4.5% bond environment

This snapshot suggests a reasonably priced, profitable company with a well-covered dividend and a meaningful earnings premium over bonds — a profile consistent with value-oriented investors' screens.

Trailing vs. forward figures

All ratios in this calculator use trailing twelve-month (TTM) figures — what the company actually earned and paid, not what analysts forecast. TTM is factual but backward-looking; a company whose earnings are growing rapidly will look cheaper on forward estimates than on trailing ones. Both perspectives have value; TTM anchors the calculation in reality.

How to use this calculator

1. Enter the share price — use the current market price (the ratios will update in real time if the price changes)
2. Enter EPS — find this in the income statement or any financial data site under "EPS (TTM)" or "Diluted EPS"
3. Enter BVPS — from the balance sheet: shareholders' equity ÷ shares outstanding
4. Enter DPS — the total annual dividend declared per share; set to 0 for non-dividend stocks

All four inputs use the same currency, so the ratios are dimensionless and currency-agnostic.