P/E Ratio (Price-to-Earnings)
Valuation measure dividing a stock’s price by its earnings per share.
Detailed Description
P/E Ratio (Price-to-Earnings)
What does a high P/E ratio indicate?
A high P/E ratio may suggest that investors expect high growth rates in the future.
What is the difference between trailing P/E and forward P/E?
Trailing P/E is based on past earnings, while forward P/E uses projected earnings for the next 12 months.
Why is the P/E ratio limited as a valuation metric?
The P/E ratio does not account for growth rates, debt levels, or the overall economic environment.
How do industry variations affect P/E ratios?
Different industries have varying average P/E ratios due to differences in growth potential and risk profiles.
What should investors consider when using the P/E ratio?
Investors should use the P/E ratio alongside other metrics and consider industry norms for a comprehensive assessment.