What is a good P/E ratio?

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.

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.

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.

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.

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.

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!

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.

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.