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.

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