# Why does my P/E look strange?

Occasionally you are looking at a stock, and evaluating its P/E ratio(price to earnings ratio), and you see something like this:

Price to earnings ratio of GE

## Problem 1: The Ratio is missing

The grey line is the P/E ratio — but it is totally absent before 2023! What’s going on? GE has been around since forever (1892, to be exact, according to the company founding page).

Thinking about the Price/Earnings ratio yields the first clue: either the price is weird, or the earnings are. Since the price is in blue, and is clearly present, it makes sense that the earnings are suspect. So plotting the earnings should help. There are two reasonable choices for the earnings:

• NetIncome_T12M — the sum of the last four quarterly earnings
• NetIncome_1Y — the net income off of the last yearly statement. This could be up to a year out of date, or it could have been reported in the last quarterly statement, if it was also an annual statement.

Plotting them both gives us this:

GE with both incomes plotted in addition to P/E ratio

Notice that the teal and purple lines (both incomes) go back to the left edge of the chart. What gives, then. Notice where zero is (look on the left edge of the chart). The teal income (trailing twelve months) was less than zero. By convention, people commonly do not regard P/E ratios as valid for money losing companies. And GE was, sadly, a money losing company from mid-2021 to mid-2023.

## Problem 2: The P/E ratio is really high

The second thing to notice is that the price to earnings ratio is over 500 for that stock, in 2023! That makes the chart look weird, and makes it really hard to see what’s going on with the P/E ratio later on. Strange as it may look, it is totally normal. When GE limped back to profitability, it did so by a tiny margin (its earnings were \$203m vs a market cap of about \$90B). Thus its ratio was temporarily insane — over 500. This resolved by the earnings going back up to more normal levels, and the price to earnings ratio declining to more normal levels (18 by the end of the chart)