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Price-to-Earnings ratio is often used to gauge the relative cost of one stock to another with respect to earnings. The average P-to-E (or P/E) is
Price-to-Earnings ratio is often used to gauge the relative cost of one stock to another with respect to earnings. The average P-to-E (or P/E) is 15 to 25 for most companies in the market. If a company is trading with a P/E of 85, should you buy the stock? O a. Yes, the shares are cheap. b. The P/E is a bad proxy for value and is never used in reality. o c. Provided other shares in the market are still trading at the average P/E, this company's stock is relatively expensive and should not be bought at this time unless there is some reason to rationalize such a price multiple (such as large expected sales growth in the future) d. No, the shares are categorically expensive and therefore it is a bad investment
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