finance
 






 

Question by  something (26)

What is a good P/E ratio?

 
+8

Answer by  mlucas (515)

While P/E ration is one piece of the puzzle in determining whether to invest in a company it should not be used alone. In general a P/E ratio less than 20 is good and less that 12 is very good. You should avoid investing if the ratio is above 25.

 
+7

Answer by  William88 (29)

It is a Financial Ratio that indicates positive valuation. It means that investors will have to pay more for each unit of net income, so stocks have a higher price compared to others with lower P/E ratio. It reveals how highly a company's share is valued compared to the annual profit earned by the firm per share.

 
+6

Answer by  daltonbob (52)

It depends on two things: the type of company (what industry it is in) and the type of investor. For instance, a tech company should have as high a P/E ration as possible: 40 to 50, while a more modest industry standard would be 20. Value investors want consistancy over higher ratios.

 
+6

Answer by  acgood (47)

Stocks with identical P/E ratios could be good or bad investments. It depends on the individual company and its sector. Compare between similar companies (lower PE= "cheaper") and for a company over time. A PE around the percentage rate of a company's earnings growth is generally quite attractive.

 
+5

Answer by  Liz59 (10966)

Well, there is no obvious good Price earnings ratio but it depends on how much stocks you are investing in. It is all relative you see.

 
+5

Answer by  crazycool (145)

Usually about 15-25. You have to be careful about ones over 25. Especially if it's over 40 or so, it may be over-valued. This means the value could plummet at any time. If you're looking for bargains, look for companies under 15. Staying in between 15 and 25 is the safest!

 
+4

Answer by  Liz59 (10966)

A good p/e ratio depends on the circumstance. Ideally, its best to have a 1 to 1 ratio, which pretty much states but if you have a ratio over 25% then you are good to go for a company.

 
+2

Answer by  gkimmer (10)

There is no such thing. The P/E ratio is just an indicator; must be used in conjunction with other indicators.

 
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