What is the price-to-earnings ratio (P/E)?
The price-to-earnings ratio (P/E) is a company's share price divided by its earnings per share, showing how many dollars investors pay for each dollar of annual earnings. Trailing P/E uses the last 12 months of earnings; forward P/E uses expected earnings. A company with no earnings has no meaningful P/E. The ratio is most useful for comparing similar companies, or one company over time.
Why it matters to a revenue leader
P/E is how growth expectations turn into a share price. A high P/E can mean investors expect fast earnings growth, and the sales team is the one that has to deliver it. A miss that lowers future earnings estimates can cut both the earnings and the multiple investors are willing to pay, so the share price falls twice. For a CRO, a high P/E means the market is counting on the pipeline.
How to calculate it
P/E = share price ÷ earnings per share. A common mistake is mixing forward and trailing figures, or comparing P/E across industries with very different growth rates and capital needs.
Example
Fictitious numbersA public inspection services company trades at $60 with trailing EPS of $2.40, a P/E of 25. A peer with the same EPS trades at $36, a P/E of 15. Investors expect faster earnings growth from the first company, and its sales team carries that expectation into every quarter.
"What growth rate is built into our share price, and does our pipeline support it?"
Sources
- Price-to-Earnings (P/E) Ratio: Definition, Formula, and Examples checked 9 Oct 2026
- Earnings Per Share checked 9 Oct 2026