High PE Ratio Means What? A Good Stock?

P/E Ratio
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Manoj Jayale
Manager, India

High PE Ratio Means What? A Good Stock?

What is the meaning if Company A has been trading at a higher PE ratio than company B?
Does it mean we should buy this stock or not?
Can anyone explain? Thanks...

  Rajiv Singh
Student (University), United Kingdom
 

Meaning of P/E Ratio

No, it does NOT mean a good stock, nor a bad one. It just means how much a company is earning per share.
How strong the stock of a company is, also depends upon the volume of stock a company is using to trade.
When the company's P/E ratio is low this means it is generating a low income per share. However, how much total earnings it accumulates can be calculated by:
Earning per share * total volume traded.

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