Wiki quotes: "P/E ratios are highly dependent on capital structure. Leverage (i.e. debt taken on by the company) affects both earnings and share price in a variety of ways, including the leveraging of earnings growth rates, tax effects and impacts on the risk of bankruptcy, and can sometimes dramatically affect the company's results. For example, for two companies with identical operations and taxation regime, and trading at typical P/E ratios, the company with a moderate amount of debt will commonly have a lower P/E than the one with no debt, despite having a slightly higher risk profile, slightly more volatile earnings and (if earnings are increasing) a slightly higher earnings growth rate. At higher levels of leverage (where the risk of bankruptcy forces up debt costs) or if profits decline substantially (driving up the P/E ratio) the indebted firm will have a higher P/E ratio than an unleveraged firm. To try to eliminate these leverage effects and better compare the values of the underlying operating assets, it is often preferable to use multiples based on the enterprise value of a company, such as EV/EBITDA, EV/EBIT or EV/NOPAT." Shouldn't the debted firm have a lower p/e ratio? A company with heavy debt will trade at a lower price, lowering the p/e ratio no?