PER
Price Earnings Ratio. The share price divided by earnings per share, indicating how many years of current earnings the market is paying for
PER (Price Earnings Ratio) is the share price divided by earnings per share (EPS), or equivalently, market capitalization divided by net income. It shows how many multiples of annual profit the market is paying for a company. A lower PER is generally interpreted as cheaper relative to earnings, while a higher PER suggests higher growth expectations. Sector and growth-stage differences are large: TOPIX as a whole traded in a PER range of roughly 12-17x during the 2016-2025 decade.
Calculation and Variants
PER is calculated as 'share price / EPS.' Variants depend on which EPS is used. Trailing PER uses the most recent full-year reported earnings, while forward PER uses company guidance or consensus analyst estimates for the next fiscal year. In Japan, the Shikiho (Company Handbook) and Bloomberg forward PER are widely referenced. Special items or one-off gains can distort EPS and thus PER, so some investors use adjusted PER based on recurring operating profit.
Sector-Level Norms
PER comparisons across sectors are unreliable because growth profiles differ. Regulated utilities typically trade at 10-12x, banks at 8-12x, while high-growth SaaS and semiconductor design companies commonly sustain 30-50x or higher. Peer comparison within the same sector, comparison with the company's own historical PER range, and the PEG ratio (PER / EPS growth rate) are more actionable frameworks than raw PER levels.
Combining PER with PBR
Multiplying PER by ROE yields PBR (since PBR = PER x ROE). A stock with low PER and low PBR may be a value trap with structurally low ROE. A stock with low PER but PBR above 1.0 signals decent ROE and potential upside from re-rating. Rather than relying on PER alone, combining it with ROE and dividend payout ratio produces a more rounded valuation assessment.