PER can refer to several different calculations depending on the field. The three most common are the price-to-earnings ratio in finance, the player efficiency rating in basketball, and the protein efficiency ratio in nutrition. Each uses a distinct formula, so here’s how each one works.
Price-to-Earnings Ratio (P/E) in Finance
The price-to-earnings ratio is the most widely used version of “PER” and one of the most fundamental metrics in investing. The basic formula is simple: divide a company’s current stock price by its earnings per share (EPS). If a company’s stock trades at $53 per share and it earned $3.44 per share over the past year, its P/E ratio is 15.4. That number tells you investors are willing to pay $15.40 for every $1 of earnings the company generates.
There are two main versions of this calculation. Trailing P/E uses earnings from the previous 12 months and is what most analysts mean when they reference “the P/E ratio.” Forward P/E swaps in projected earnings for the next 12 months instead. Trailing P/E reflects what a company has actually earned, while forward P/E reflects what analysts expect it to earn. Forward P/E will be lower than trailing P/E if earnings are expected to grow, and higher if earnings are expected to shrink.
What P/E Actually Tells You
A high P/E ratio suggests investors expect strong future growth, which is why tech companies often carry P/E ratios of 30, 40, or higher. A low P/E might signal that a company is undervalued, or it might mean the market expects its earnings to decline. Neither a high nor low P/E is inherently good or bad. The number is most useful when you compare it to other companies in the same industry or to the company’s own historical P/E range.
One important limitation: P/E ratios break down when a company has negative earnings, since dividing by a negative number produces a meaningless result. Companies with extremely volatile earnings can also produce misleading P/E figures in any given quarter.
Player Efficiency Rating (PER) in Basketball
The player efficiency rating was created by analyst John Hollinger to distill a basketball player’s statistical output into a single number. The league average PER is set at 15.0 every season, so any player above 15 is performing above average on a per-minute basis, and anyone below 15 is below average. Elite players typically land in the 25 to 30+ range.
Unlike the P/E ratio, PER doesn’t have a clean one-line formula. It pulls from nearly every box score statistic: points, rebounds, assists, steals, blocks, field goal attempts, free throw attempts, turnovers, and personal fouls. Each stat is weighted, and the raw total is then adjusted for both the player’s team pace and the overall league pace so that players on fast-paced teams aren’t artificially inflated. The result is a per-minute rating that attempts to account for both positive contributions and negative ones.
Key Components of the Formula
Two intermediate calculations help build the final PER number. Usage rate measures how many possessions a player uses per 40 minutes, factoring in shot attempts, free throw attempts (multiplied by 0.44 to account for and-ones and technical free throws that don’t end possessions), assists, and turnovers. Turnover ratio captures turnovers as a percentage of total possessions used. Both feed into the broader PER calculation.
PER also incorporates a position replacement level (PRL), which sets a baseline for each position. Point guards have a replacement level of 11.0, shooting guards and small forwards 10.5, power forwards 11.5, and centers 10.6. A related stat called Value Added uses these baselines: it multiplies a player’s minutes by the difference between their PER and their position’s replacement level, then divides by 67.
The biggest criticism of PER is that it leans heavily on offensive stats and doesn’t capture defensive impact well. A player who contributes elite perimeter defense but scores modestly will have a lower PER than their true value warrants.
Protein Efficiency Ratio (PER) in Nutrition
The protein efficiency ratio measures how effectively a protein source promotes growth in a controlled animal study. The formula is straightforward: divide the weight gained (in grams) by the total weight of protein consumed (in grams) over a four-week feeding period. A rat that gains 50 grams while eating 20 grams of protein from a test food would give that food a PER of 2.5.
Results are compared against casein, the primary protein in milk, which serves as the reference standard with a benchmark value of 2.7. Proteins that score above 2.7 are considered higher quality than casein, while those below are considered lower quality. In practice, most animal proteins score in the 2.0 to 3.0+ range, while many plant proteins fall below 2.0.
Limitations of PER
PER was one of the earliest standardized methods for evaluating protein quality, but it has significant drawbacks. The most obvious is that it’s based on rat growth, not human nutrition. Rats have different amino acid requirements than humans, so a protein that scores well for a rat may not be equally valuable for a person. PER also only measures growth promotion, which favors animal proteins and doesn’t capture other aspects of protein quality like digestibility or amino acid balance.
For these reasons, most international nutrition standards have moved toward newer metrics. The protein digestibility corrected amino acid score (PDCAAS) factors in both amino acid composition and how well humans can digest a protein, making it more relevant for evaluating foods in a human diet. Canada still uses PER for its protein rating system on food labels, but globally, PDCAAS and its successor (DIAAS) are now the preferred measures.