The Historical Evolution of Attempts to Replace or Complement the Price–Earnings (P/E) Ratio by Introducing Earnings Growth, Interest Rates, and Risk into Equity Valuation

The Price–Earnings (P/E) ratio has long been a central tool in equity valuation, yet it remains a fundamentally static metric that fails to incorporate earnings growth, the time value of money, and risk. This article traces the historical evolution of analytical frameworks that have sought to correct, extend, or replace the P/E ratio by progressively introducing these missing dimensions. From early multiple-based approaches to discounted cash flow models, growth-adjusted ratios, and finally time-based valuation frameworks, the literature reveals a gradual conceptual shift. The decisive break occurs when valuation is no longer expressed as a multiple but as a payback period measured in time, first introduced in 1985 through the Délai de Recouvrement and later generalized as the Potential Payback Period (PPP). This time-based valuation can ultimately be translated into a Stock Internal Rate of Return (SIRR), enabling equity valuation to be expressed in terms of forward-looking, risk-adjusted returns. The article shows how this progression culminates in a coherent framework for assessing intrinsic value and comparing equities on a consistent basis.