Figuring a historical P-E ratio is easy
— -- Q: How do I find what a stock's price-to-earnings ratio (P-E) was in the past?
A: The price-to-earnings ratio, or P-E, is a popular way to gauge how expensive a stock is.
The ratio tells you what the stock price is relative to the comany's earnings. For example, if a stock's P-E is 10, you would be paying 10 times earnings to buy a share of the stock. The P-E is calculated by dividing the stock's share price by its earnings per share. The higher the P-E, the more pricey a stock is relative to its earnings.
Most investing websites provide current P-E ratios. Enter a stock symbol in the quote box at USA TODAY's Money section (money.usatoday.com), and you'll find the stock's P-E under the chart.
You need two things: The stock's value on Jan. 11, 2000 and the company's per-share earnings for the previous year. To get the stock price from USA TODAY.com's Money section, enter GE in the Get a Quote box and hit enter. Choose the "Charts" tab, then click "Go to Java charting." Use the Time Frame pulldown to change the chart's time frame to a decade, then click and drag your mouse to zoom in on the time around Jan. 11, 2000. Then, use your mouse to pinpoint GE's stock price that day: $50.333.
Next, you need the most recent per-share earnings for that period. Open the financial section of GE's 2000 annual report, available here http://www.ge.com/annual00/financial/images/GEannual00_financials.pdf, and look at page two. Here, you'll see GE's diluted earnings per share for 1999 of $1.07.
To get the P-E, simply divide the share price of $50.33 by earnings per share of $1.07 to get 47.
Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com.
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