Is P/E ratio still a good indicator for deciding which stocks to invest in?

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On its own P/E tells you precious little. A growth company can have an absurdely high PE and still be a bargain (most huge companies today like Apple, Amazon or Facebook did at some point have such high P/E figures). A low P/E can mean that the company is a bargain, is just chugging along without any prospects to go up or down, or people have lost confidence and is likely to fold soon. Take your pick.


Not if you just look at the PE on Yahoo it isn’t. Let’s take Disney as an example since you brought it up, its net earnings last year was 2 billion dollars giving it a PE of 77, is that a normal earnings? no it is not, due to covid it had to shut down its parks. So let’s look back at 2019 what did it earn back then pre covid with everything opened up and running? It earned around 11 billion. Will it earn that again, oh most definitely IMHO. With 11 billion earnings its PE ratio is only 14. That is a nice healthy PE ratio. That is a more realistic current PE number adjusted for non-recurring expenses. My point is you have to ignore non-recurring events. The only way to do that is to look at past history and the annual report. Sorting out companies with low PE on a website is completely worthless. You could get an extremely low PE if, for example, the company make some money selling part of the company. But this is a one-time event don’t let the one-time events fool you. Disney in my book is a buy right now IMHO.


I think they can be useful when comparing businesses in the same industry.


It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.


It’s absolutely 100% useless on it’s own. A stock could technically have 1000 PE and be a good investment, or 1 PE and be 100% guaranteed to lose you all your money.