lowtrade

[lowtrade]

P/E Is price divided by earnings per share EPS.

This ratio is sometimes call the premium. Or price retail will pay above the actual earnings.

Each exchange & sector has their individual norm's. Like The average stock on the S&P 500 has a P/E of 15 or the average stock in the pharma sector has a P/E of 30. I don't know if those examples are accurate. You have to research to find out the latest averages, as they change.

Now if you know your companies P/E and the average premium payed for the exchange or sector, you can judge if the stock is priced high, low, or in the middle of it's peers.

This will effect your decision to enter. Same as how well the fundamentals or charts are. It's basically a big board way to evaluate over bought / over sold, for a buy & hold investment.

If it's at the high end of the averages, The stock price will find it harder to increase, because the stock is thought to be over valued already. And vise versa.