Do low PE stocks outperform? (2024)

Do low PE stocks outperform?

Stocks with high price-to-earnings (P/E) ratios can be overpriced. So, is a stock with a lower P/E ratio always a better investment than a stock with a higher one? The short answer is no. The long answer is that it depends on the situation.

Is a low PE good for a stock?

If the share price falls much faster than earnings, the PE ratio becomes low. A high PE ratio means that a stock is expensive and its price may fall in the future. A low PE ratio means that a stock is cheap and its price may rise in the future. The PE ratio, therefore, is very useful in making investment decisions.

What is an overrated PE ratio?

A high P/E ratio may suggest that investors are expecting higher earnings in the future. The P/E ratio can be misleading because it is either based on past data or projected future data (neither of which are reliable) or possibly manipulated accounting data.

Why is PE ratio not a good indicator?

The biggest limitation of the P/E ratio: It tells investors next to nothing about the company's EPS growth prospects. If the company is growing quickly, you will be comfortable buying it even it had a high P/E ratio, knowing that growth in EPS will bring the P/E back down to a lower level.

Why is a low PE ratio bad?

That is, the P/E ratio shows what the market is willing to pay today for a stock based on its past or future earnings. A high P/E ratio could signal that a stock's price is high relative to earnings and is overvalued. Conversely, a low P/E could indicate that the stock price is low relative to earnings.

Does low PE mean undervalued?

In general, if the company's current P/E is at the lower end of its historical P/E range or below the average P/E of similar companies, it may be a sign that the stock is undervalued—regardless of recent business performance.

What is Amazon's current PE ratio?

As of today (2024-04-19), Amazon.com's share price is $179.22. Amazon.com's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Dec. 2023 was $2.90. Therefore, Amazon.com's PE Ratio for today is 61.80.

What is the PE ratio of Tesla?

Therefore, Tesla's PE Ratio for today is 36.45. During the past 13 years, the highest PE Ratio of Tesla was 1396.86. The lowest was 31.23.

Which company has lowest PE ratio?

Why is Amazon PE ratio so high?

Why is Amazon PE Ratio so high? Amazon's P/E ratio is higher than most companies in the retail industry because investors are optimistic about its future growth potential. As mentioned, a high price multiple can indicate the market expects higher growth from a company.

What PE is considered undervalued?

Price Earnings (P/E) ratio is one of the most popular ways of valuing a stock. The thumb rule is that a low P/E ratio is a sign of undervaluation while a high P/E ratio is a sign of overvaluation.

What is an undervalued PE ratio?

In fact, many investors, strategists and analysts consider a PEG Ratio lower than 1.0 the best. That's because a ratio lower than 1 suggests that the company is relatively undervalued. Just remember: like the forward P/E ratio, however, it is based on future growth estimates, which may not materialize.

What is the PE ratio for an intelligent investor?

Price to Earnings Ratio

Price to Earnings Ratio (P/E) is the ratio of EPS to the company's share price. The trick here is to invest in companies with a P/E Ratio of 9.0 or less. Companies that sell for low prices compared to EPS are often undervalued, meaning the value should increase.

What are the pitfalls of the PE ratio?

The P/E ratio does not take into account a company's debt levels. A company with a high debt-to-equity ratio may have a low P/E ratio, but it could also be a sign of financial distress. Conversely, a company with low debt levels may have a high P/E ratio, but it could also be a sign of financial strength.

What is the current PE ratio of the S&P 500?

S&P 500 P/E Ratio is at a current level of 24.79, up from 23.27 last quarter and up from 22.23 one year ago. This is a change of 6.51% from last quarter and 11.53% from one year ago. The S&P 500 PE Ratio is the price to earnings ratio of the constituents of the S&P 500.

What is the historical PE ratio of the S&P 500?

PE Ratio (TTM) for the S&P 500 was 26.63 as of 2024-04-12, according to GuruFocus. Historically, PE Ratio (TTM) for the S&P 500 reached a record high of 131.39 and a record low of 5.31, the median value is 17.89. Typical value range is from 19.83 to 28.07. The Year-Over-Year growth is 13.94%.

What are signs of an undervalued stock?

Some traders consider stock to be undervalued if the earnings yield is higher than the average interest rate the US government pays when borrowing money (known as the treasury yield). Earnings yield example: ABC has EPS of $10 and the share price is $50. The earnings yield will be equal to 20% ($10/$50).

Why paper stocks have low PE?

The paper industry is intrinsically cyclical, influenced by demand-supply dynamics and input costs. Hence, the performance of paper stocks is contingent on earnings growth.

Is Google's PE ratio good?

GOOGL PE ratio history

The PE ratio of Alphabet has averaged 28.88 over the last ten years. The current price-to-earnings ratio of 26.62 is 8% less than the historical average.

What is the PE ratio of Walmart?

As of today (2024-04-19), Walmart's share price is $59.21. Walmart's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Jan. 2024 was $1.91. Therefore, Walmart's PE Ratio for today is 30.94.

Does Netflix have a high PE ratio?

Min: 15.93 Med: 121.52 Max: 559.67

During the past 13 years, the highest PE Ratio of Netflix was 559.67. The lowest was 15.93. And the median was 121.52.

What is Apple's forward PE?

Apple's Forward PE Ratio for today is 25.96. Apple's PE Ratio without NRI for today is 26.38. Apple's PE Ratio for today is 26.38.

What is the best PE ratio to buy?

To give you some sense of what the average for the market is, though, many value investors would refer to 20 to 25 as the average P/E ratio range. And again, like golf, the lower the P/E ratio a company has, the better an investment the metric is saying it is.

Is AMD PE too high?

AMD PE ratio history

The average historical PE ratio of Advanced Micro Devices for the last ten years is 131.11. The current PE ratio of 292.6 is 123% above the historical average.

What is the safest PE ratio?

Typically, the average P/E ratio is around 20 to 25. Anything below that would be considered a good price-to-earnings ratio, whereas anything above that would be a worse P/E ratio. But it doesn't stop there, as different industries can have different average P/E ratios.