What is the current P/E ratio of the FTSE 100?

As of January 2026, the FTSE 100 has a trailing P/E of 14.87 and a forward P/E of 13.35, based on Siblis Research data. The CAPE (10-year smoothed) ratio stands at 20.1. The long-term FTSE 100 average CAPE is approximately 16x, suggesting the index is modestly above its historical fair value but not in expensive territory.

What is a good P/E ratio for a UK stock?

For FTSE 100 stocks, a P/E below 15x is generally considered attractively valued, 15x to 18x is broadly fair value and above 20x requires strong earnings growth to justify. Sector context matters significantly, banks trade much lower than consumer staples or healthcare companies, even at equivalent fundamental quality.

What is the difference between trailing and forward P/E?

Trailing P/E uses the last 12 months of actual reported earnings. Forward P/E uses analyst consensus estimates for the next 12 months. Forward P/E is more forward-looking but relies on forecast accuracy. When a company is growing, forward P/E is usually lower than trailing P/E.

Can I use P/E ratio to compare UK and US stocks?

With caution. The FTSE 100 historically trades at a meaningful discount to the S&P 500 due to different sector composition, the FTSE 100 is dominated by financials, energy and mining, which trade at structurally lower multiples than the technology-heavy S&P 500. The S&P 500 currently trades at a trailing P/E of approximately 26.8x versus 14.87x for the FTSE 100, but this gap reflects genuine differences in sector mix and growth rates, not necessarily pure undervaluation.

What does a very low P/E ratio mean?

A very low P/E can mean a stock is genuinely undervalued and represents good value or it can mean the market expects earnings to fall significantly in future. A stock trading at 5x earnings when its history shows 15x warrants investigation: either the market is wrong and it is a bargain, or there is a business reason for the discount that is not yet fully reflected in reported earnings.

What is the PEG ratio and how does it relate to P/E?

The PEG ratio is the P/E ratio divided by the expected earnings growth rate. It adjusts for growth and allows fairer comparison between fast and slow-growing companies. A PEG below 1.0 is often considered attractive; above 2.0 is considered expensive. The P/E alone does not account for growth rate, which makes the PEG more useful when comparing companies across different growth profiles.

Can a P/E ratio be negative?

Yes, if a company is losing money (Net Loss), the EPS is negative, resulting in a negative P/E. Many investors ignore P/E for loss-making companies and use Price-to-Sales (P/S) instead.

Is a low P/E always better?

Not necessarily. A very low P/E can be a 'value trap'—a company that looks cheap because its business model is failing or its earnings are expected to collapse.

How do I find a company's EPS?

EPS is found in the company's annual report or on financial news sites. It is simply the Net Profit divided by the number of shares in circulation.

Does the P/E ratio work for ETFs?

Yes, most providers give a weighted average P/E for the entire basket of stocks within the ETF.

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Enter a company's current share price and earnings per share (EPS) to instantly calculate its Price-to-Earnings ratio, one of the most widely used tools for assessing whether a UK stock is cheap, fairly valued or expensive.

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Mastering the P/E Ratio: A Guide for UK Investors

The Price-to-Earnings (P/E) ratio is perhaps the most widely used metric for valuing stocks on the London Stock Exchange (LSE). It represents the amount an investor is willing to pay for every £1 of a company's earnings.

The Core Formula

P/E Ratio = Price Per Share ÷ Earnings Per Share (EPS)

Why It Matters

A high P/E often suggests high growth expectations (like tech stocks), while a low P/E might indicate a "value" stock or a company facing challenges.

Trailing vs. Forward P/E

Trailing P/E: Uses actual earnings from the past 12 months. It is reliable but looking backwards.
Forward P/E: Uses estimated future earnings. Vital for growth investing but relies on analyst forecasts.

What is a "Good" P/E Ratio?

Context is king. A P/E of 20 might be cheap for a software company growing at 50% per year, but expensive for a utility company growing at 2%. Investors should always compare a stock's P/E to its Industry Average and its own Historical P/E.

P/E Ratio Frequently Asked Questions

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UK P/E Ratio Calculator

What Is the P/E Ratio?

The Price-to-Earnings ratio (P/E ratio) tells you how much investors are currently paying for each pound of a company's earnings. It is calculated by dividing the current share price by the earnings per share:

P/E Ratio = Share Price ÷ Earnings Per Share (EPS)

Worked example: A company's shares trade at £15.00. Its EPS for the last 12 months is £1.00.

P/E Ratio = £15.00 ÷ £1.00 = 15x

This means investors are currently paying 15 times the company's annual earnings to own one share. Whether that is cheap or expensive depends on the company's sector, growth prospects and how it compares to the broader market.

Trailing P/E vs Forward P/E

There are two main versions of the P/E ratio and understanding which one you are looking at changes the interpretation significantly.

Trailing P/E (TTM, Trailing Twelve Months) uses the actual earnings reported over the last 12 months. It is based on real, audited numbers and is the most commonly referenced version for historical valuation comparison.

Forward P/E uses analyst consensus forecasts for the next 12 months of earnings. It reflects market expectations of where earnings are going rather than where they have been. Forward P/E is particularly useful for fast-growing companies where last year's earnings significantly understate current earning power or for cyclical companies at an earnings peak or trough.

As of January 2026, the FTSE 100's trailing P/E ratio stands at 14.87 and the forward P/E is 13.35, reflecting analyst expectations of earnings growth through 2026. The CAPE (Cyclically Adjusted P/E) ratio, which smooths earnings over a 10-year period to remove cyclical distortions, stands at 20.1 for the FTSE 100.

What Is a Good P/E Ratio for UK Stocks?

There is no single "good" P/E ratio, it is always relative to context. But for the FTSE 100, broadly accepted reference ranges in 2026 are:

P/E Range

Interpretation for FTSE 100

Below 10x

Potentially undervalued or market expects significant earnings decline

10x – 15x

Attractively valued relative to FTSE 100 norms

15x – 18x

Fair value, broadly in line with historical average

18x – 25x

Moderately expensive, requires earnings growth to justify

Above 25x

Expensive by FTSE 100 standards, high growth must be priced in

Negative

Company is loss-making, P/E not meaningful

The FTSE 100's long-run average CAPE ratio is approximately 16x. The index has historically traded between 10x and 20x cyclically adjusted earnings over the last 40 years, with extremes of 32x at the peak of the dot-com bubble and 9x at the depth of the 2008 financial crisis.

By comparison, the S&P 500 trades at a trailing P/E of approximately 26.8x, significantly more expensive than the FTSE 100 on most valuation measures, which partly explains the growing international interest in UK equities in 2025 and 2026.

How to Use the P/E Ratio When Evaluating a UK Stock

The P/E ratio is most useful as a comparative tool rather than an absolute measure. Here is how to apply it practically:

Compare against the sector: A P/E of 8x might look cheap for a consumer goods company but is perfectly normal for a bank or an oil major. Sector context is everything. UK banks typically trade between 7x and 12x earnings. Consumer staples like Unilever trade at 15x to 22x. High-growth technology companies may trade at 30x or more.

Compare against the historical average: A company trading at 20x when its 10-year average is 12x is expensive relative to its own history, regardless of the absolute number.

Compare against peers: Is the company cheaper or more expensive than direct competitors? If cheaper, why? If more expensive, does the growth rate justify the premium?

Consider the earnings quality: A P/E ratio is only as reliable as the earnings figure underneath it. Check whether EPS is based on reported earnings or adjusted earnings (which strip out one-off items). Some companies report very different adjusted and unadjusted earnings and the headline P/E may be misleading if based on heavily adjusted figures.

The CAPE Ratio: A More Reliable Long-Term Tool

The standard P/E ratio can be distorted by temporary peaks or troughs in earnings, a one-off write-down can inflate P/E dramatically, while a one-off windfall can make it look artificially cheap.

The Cyclically Adjusted Price-to-Earnings ratio (CAPE), developed by economist Robert Shiller, smooths earnings over a 10-year period, adjusting for inflation. This removes short-term noise and gives a more reliable picture of whether the overall market or an individual sector is over or undervalued relative to long-run norms.

For the FTSE 100, the current CAPE of 20.1 sits modestly above the long-term average of approximately 16, reflecting the index's strong price gains since 2025. The fair value range for the index sits between approximately 7,800 and 12,600 under current CAPE modelling, with the index currently within this range.

The CAPE is most useful for index-level valuation and long-term positioning. For individual stock analysis, the standard trailing and forward P/E remain the most practical tools.

What a Negative P/E Means

If a company's EPS is negative, meaning it is loss-making, the P/E ratio produces a negative number or is simply shown as "N/A." A negative P/E is not meaningful and should not be compared against positive P/E ratios.

Loss-making companies are valued differently by the market, typically on revenue multiples, price-to-sales ratios or on a discounted cash flow basis for the expected future earnings once profitability is achieved. This is common for early-stage technology and biotech companies listed on AIM or the FTSE 250.

P/E Ratio and Dividend Yield

For UK income investors, the P/E ratio and dividend yield work well in combination as a screening tool.

A company with a low P/E ratio and a high dividend yield that is well covered by earnings can indicate genuine undervaluation, a situation where you are being paid well to wait for the market to re-rate the stock upwards. This approach, sometimes called value investing with an income kicker, has historically performed well in the FTSE 100 universe.

Conversely, a company with a very high yield but a very high P/E (suggesting the market is pricing in strong future earnings growth) warrants more careful scrutiny, both the income and the valuation assumptions may not be simultaneously achievable.

P/E Limitations

The P/E ratio is powerful but incomplete. Here is what it does not capture:

Debt levels: two companies with identical P/E ratios but very different debt loads carry very different risk profiles. Enterprise Value to EBITDA (EV/EBITDA) is a better measure when debt varies significantly.

Cash generation: a company may report high accounting earnings but generate less actual cash. Price to Free Cash Flow (P/FCF) is more reliable for businesses with high capital expenditure.

Growth rate: the PEG ratio (P/E divided by the expected earnings growth rate) adjusts for growth, making it more useful for comparing a fast-growing company with a slow-growing one. A P/E of 20x with 20% annual growth (PEG of 1.0x) is more attractive than a P/E of 10x with 2% growth (PEG of 5.0x).

Sector norms: comparing a utility's P/E to a technology company's is not meaningful. Always compare like with like.

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References

Siblis Research. FTSE 100 P/E and Earnings Growth 2026. siblisresearch.com, January 2026
UK Dividend Stocks. Is the FTSE 100 Expensive After Its Recent Gains? ukdividendstocks.com, April 2026
PE-Ratio.com. FTSE 100 P/E Ratio List, Current Data. pe-ratio.com
Motley Fool UK. Growth Stocks with P/E Ratios Below the FTSE 100 Average. fool.co.uk, October 2025
Indie Investor. FTSE 100 Dividend Yield 2026. indieinvestor.co.uk, May 2026
Simply Wall St. UK Market Analysis and Valuation. simplywall.st
London Stock Exchange. FTSE 100 Index Data. londonstockexchange.com

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