What does PE mean for stocks? (2024)

What does PE mean for stocks?

Price to earnings ratio, or P/E, is a way to value a company by comparing the price of a stock to its earnings. The P/E equals the price of a share of stock, divided by the company's earnings-per-share. It tells you how much you are paying for each dollar of earnings.

What is a good PE ratio for a stock?

Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio.

What is a PE ratio for dummies?

Key Takeaways. The price-to-earnings (P/E) ratio is the proportion of a company's share price to its earnings per share. A high P/E ratio could mean that a company's stock is overvalued or that investors expect high growth rates.

Should I buy a stock with a high PE?

An investor might be comfortable buying in at a high P/E ratio expecting earnings growth to bring the P/E back down to a lower level if the company is growing quickly. But they might look elsewhere for a stock with a lower P/E if earnings aren't growing quickly enough.

What is a good PE and PB ratio?

The price-to-book ratio is used by value investors to identify potential investments. P/B ratios under 1.0 are typically considered solid investments by value investors. A good P/B ratio is relative to a business and its industry.

Is 30 a bad PE ratio?

P/E 30 Ratio Explained

A P/E of 30 is high by historical stock market standards. This type of valuation is usually placed on only the fastest-growing companies by investors in the company's early stages of growth. Once a company becomes more mature, it will grow more slowly and the P/E tends to decline.

Is a 200 PE ratio good?

A P/E ratio of 200 is high. But it is basically saying that people expect the company to grow earnings to be 15 to 20 times as large as they are now (so the P/E ratio would be 10 to 15). If you don't think that the company has that kind of potential, don't invest.

Why is Amazon PE ratio so high?

Why is Amazon PE Ratio so high? Amazon's P/E ratio is higher than most companies in the retail industry because investors are optimistic about its future growth potential. As mentioned, a high price multiple can indicate the market expects higher growth from a company.

Is a PE ratio of 5 good?

Is a PE ratio of 5 good? A PE ratio of 5 is both good and bad. It's good because the stock is trading at a very cheap valuation, just 5x EPS. However, very low P/E ratios typically indicate a company with very little growth potential or possibly one that will decrease in size in the future.

What is the PE ratio of Apple?

As at Apr 22, 2024, the AAPL stock has a PE ratio of 25.67. This is based on the current EPS of $6.46 and the stock price of $165.84 per share. A decrease of 13% has been seen in the P/E ratio compared to the average of 29.5 of the last 4 quarters.

Is 7 a good PE ratio?

To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.

How do you know if a stock is overvalued?

A high P/E ratio may indicate overvaluation, as it suggests that investors are willing to pay a premium for each dollar of earnings generated. Comparing a company's P/E ratio to its historical average or industry peers can provide insights into whether the stock is trading at a higher valuation.

What is the highest PE ratio of all time?

In May 2009, the P/E ratio reached a staggering 123.73x, the highest ratio in United States history. This was primarily due to the depressed earnings during the “Great Recession” and has been the only instance since 1970 in which the P/E ratio reached triple digits.

What is a bad PB ratio?

Conventionally, a PB ratio of below 1.0, is considered indicative of an undervalued stock. Some value investors and financial analysts also consider any value under 3.0 as a good PB ratio. However, the standard for “good PB value” varies across industries.

Is 0.5 a good PE ratio?

The ratio is calculated by dividing the price-earnings ratio by the sum of the earnings growth rate and the dividend yield. With this modified technique, ratios above one are considered poor, while ratios below 0.5 are considered attractive.

What PB ratio is too high?

A P/B ratio that's greater than one suggests that the stock price is trading at a premium to the company's book value. For example, if a company has a price-to-book value of three, it means that its stock is trading at three times its book value. As a result, the stock price could be overvalued relative to its assets.

Which stock has the lowest PE ratio?

Is 80 a good PE ratio?

An 80 P/E stock would have a return on equity of only 1.25% (which is very low) if earnings were held constant. The market might expect low earnings for a little while, but is expecting earnings to rise in the future.

What is the current PE ratio of the S&P 500?

Basic Info. S&P 500 P/E Ratio is at a current level of 24.79, up from 23.27 last quarter and up from 22.23 one year ago.

What if PE ratio is zero?

A Price-to-Earnings (PE) ratio becoming zero for a stock typically indicates a situation where the company is reporting negative earnings. The PE ratio is calculated by dividing the current market price of a stock by its earnings per share (EPS).

What is a good dividend yield?

What Is a Good Dividend Yield? Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.

Why does Tesla have high PE ratio?

With this information, we can see why Tesla is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

Does Netflix have a high PE ratio?

Min: 15.93 Med: 121.52 Max: 559.67

During the past 13 years, the highest PE Ratio of Netflix was 559.67. The lowest was 15.93. And the median was 121.52.

What is the PE ratio of Google?

GOOGL PE ratio history

The PE ratio of Alphabet has averaged 28.88 over the last ten years. The current price-to-earnings ratio of 26.39 is 9% less than the historical average.

Is 8 a high PE ratio?

Although eight is a lower P/E, and thus technically a more attractive valuation, it's also likely that this company is facing financial difficulties leading to the lower EPS and the low $2 stock price. Conversely, a high P/E ratio could mean a company's stock price is overvalued.