P/L (Preço/Lucro)

P/E Ratio: price-to-earnings

P/E (Price-to-Earnings, or P/L in Portuguese) is the valuation multiple everyone reaches for first: P/E = share_price / EPS, with EPS being earnings per share over the last 12 months. Read it as how much the market is willing to pay for each R$ 1 of the company's yearly profit. A low P/E (< 10) can point to an undervalued company, or just a mature or cyclical sector. A high P/E (> 30) usually bakes in expectations of strong growth. Tech names like NVIDIA trade at P/E 60+, and Tesla has run past 70+, while Brazilian banks tend to sit at P/E 8–12. Once a company posts a loss, P/E turns negative or just stops meaning anything. There's also the Shiller P/E (CAPE), which averages 10 years of inflation-adjusted earnings; it's the one analysts favor at the index level because it smooths out the cycles.

Applications and context

It's a cornerstone metric in fundamental analysis (Status Invest, Investidor10, Simply Wall St), used for stock screening, sector comparison and value investing in the Graham/Buffett tradition. The one rule to keep in mind: always compare P/E against peers in the same sector. A P/E of 15 is cheap for tech and expensive for a bank.

FAQ

What's a "good" P/E? There's no universal number. Hold it up against the sector median and the company's own track record. The S&P 500 has historically averaged somewhere around 15–20.

Trailing vs forward P/E? Trailing leans on the last 12 months of realized earnings; forward uses analyst estimates for the year ahead. Forward P/E tends to be more useful for growth stories, though it's only as good as the analyst behind it.

Why is P/E useless for some companies? When profit hovers near zero, goes negative, or swings wildly, the ratio stops telling you anything. For those cases, reach for P/S (sales), EV/EBITDA, or P/B (book value) instead.