What Are the Key Problems With Price to Earnings Ratio Analysis of a Company, or an Industry?
The 3 Possible Key Problems with the Price to Earnings Ratio are: • Investors & industry place too much emphasis on the P/E ratio: it is not the “silver bullet” that it is often portrayed as. • Investors & industry often do not carry out deep fact based comparative analysis (the market often gets the calculation incorrect). • Investors & industry often find it difficult to get comparative P/Es or industry benchmark P/E ratios (especially true for unquoted stock).
