Answers » Categories » General Finance & Investing

What is considered a low p/e number?what is considered to be a high?

What is considered a low p/e number?what is considered to be a high? Rookie here, thank you for any opinions

1 Answer

The P/E ratio compares the company's current share price to its per-share earnings. It is as:
Market Value per Share/ Earnings per Share (EPS)

According to Wikipedia “the average U.S. equity P/E ratio from 1900 to 2005 is 14 (or 16, depending on whether the geometric mean or the arithmetic mean, respectively, is used to average)”. On the basis of this we could think that any P/E under 14-16 is low.

But P/E ratios tend to vary from industry to industry. It is more useful to compare the P/E ratios of a company to another company in the same industry, or against the company's own historical P/E.

It must be noted that P/E is not the only measure that needs to be considered when buying stocks. A higher P/E ratio means that investors are willing to pay more for each unit of net income, maybe because the company has significant growing prospects, but it also might show that the stock is overvalued and a dangerous bubble may be growing.

Answer this question

by Anonymous - Already have an account? Login now!
Your Name:  

Your Answer:  
Source(s): (optional)

Enter the text you see in the image below
What do you see?
Can't read the image? View a new one.
Your answer will appear after being approved.

Ask your own question