What does it mean when "N/A" appears for a company's P/E ratio?

By Ayton MacEachern AAA
A:

A "N/A" reported in a stock's price-to-earnings ratio (P/E), can mean one of two things. The first, and simplest, would be that there is no data at time of reporting to calculate this ratio. This will be the case with a newly listed company that has yet to release its earnings. The second reason that a stock would report "N/A" as its P/E ratio could be that the number is negative. Negative P/E ratios are mathematically possible, but because they are generally not accepted by the financial community, they are usually reported as "N/A," or not applicable.

The P/E ratio is calculated as the stock's current price divided by its earnings per share (EPS). Obviously, it is not possible for a stock to have a negative price, so the negative P/E ratio comes from the EPS of the company being negative (i.e. net loss). Investors can interpret seeing the "N/A" as the company reporting a net loss, and should be aware they are buying shares of a company that is losing money per share of its stock.

To learn more, see our Understanding the P/E Ratio tutorial or Can a stock have a negative price-to-earnings (P/E) ratio?.

This question was answered by Ayton MacEachern.

RELATED FAQS

  1. How exactly do I use the price to sales ratio to evaluate a stock?

    Learn the best way for investors and market analysts to make use of the price to sales ratio in evaluating a company's stock.
  2. What is the average price-to-earnings ratio in the financial services sector?

    Learn how to calculate and use the price to earnings (P/E) ratio when analyzing an investment and what the financial services ...
  3. How does ratio analysis make it easier to compare different companies?

    Learn what ratio analysis is, how investors can compare companies within the same sector using ratio analysis and how ratios ...
  4. What other investment metrics are best used in conjunction with net margin?

    Learn about a number of other equity valuation measures that can best be used in conjunction with looking at a company's ...
RELATED TERMS
  1. P/E 10 Ratio

    A valuation measure, generally applied to broad equity indices, ...
  2. Abnormal Earnings Valuation Model

    A method for determining a company's worth that is based on book ...
  3. Franchise P/E

    The expected value of new business opportunities available to ...
  4. P/E 30 Ratio

    The price-to-earnings (P/E) ratio is the valuation ratio of a ...
  5. Price/Earnings To Growth - PEG Ratio

    A stock's price-to-earnings ratio divided by the growth rate ...
  6. Price Multiple

    Any ratio that uses the share price of a company in conjunction ...

You May Also Like

Related Articles
  1. Investing Basics

    What is the average price-to-earnings ...

  2. Stock Analysis

    Is It Finally Time To Get Defensive?

  3. Investing Basics

    How do I calculate the P/E ratio of ...

  4. Investing Basics

    How can the price-to-earnings (P/E) ...

  5. Stock Analysis

    Finding Growth At Value Prices

Trading Center