The Price to Pre-Tax Profit Ratio, or P / PTE Ratio, measures a company’s value against its Pre-Tax Earnings. It is calculated as the company's market capitalisation divided by the pre-tax profit. This is measured on a TTM basis and uses diluted shares outstanding.
This is something of a half-way house between the EV/EBITDA and Price-Earnings ratios.
The argument in its favour is that it eliminates the distortion from different corporate tax structures on earnings.
However, even this seems debatable as it fails to fully eliminating the impact of debt / capital structure by using the Enterprise Value.
Pre-tax profit is operating profit minus interest and any other non-operating expenses (except taxes).
This ratio was popularised in the "Naked Trader" book.
This is measured on a TTM basis and uses diluted shares outstanding.
| Ticker | Name | P / PTE | StockRank™ |
|---|---|---|---|
| LON:TLW | Tullow Oil | 0.83 | 34 |
| LON:FA17 | Fair Oaks Income | 0.83 | 95 |
| LON:WRKS | Works co uk | 0.88 | 87 |
| LON:RE. | R E A Holdings | 1.01 | 55 |
| LON:GEMD | Gem Diamonds | 1.27 | 59 |