High PE Ratio Means What? A Good Stock?

P/E Ratio
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Manoj Jayale
Manager, India
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... (...) Read more? Sign up for free

  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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