Again, these ratios are often used in a comparative sense, so what's good or bad depends on what you're comparing it against. 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.
Average PE of Nifty in the last 20 years was around 20. * So PEs below 20 may provide good investment opportunities; lower the PE below 20, more attractive the investment potential.
S&P 500 PE ratio
The S&P 500 has a long-term average PE ratio of about 16. Higher S&P 500 PE ratios may indicate that the index is overvalued, while lower ratios may indicate that the index is undervalued.
A stock with a price-to-sales below 1 is a good bargain as investors need to pay less than a dollar for a dollar's worth. Thus, a stock with a lower price-to-sales ratio is a more suitable investment than a stock with a high price-to-sales ratio.
A better way to tell if a stock has a good P/E Ratio is to compare it against industry averages and growth expectations. Average P/E Ratios generally range from 20 to 25. While the lower a P/E Ratio is, the better, any P/E Ratio below this average is generally considered acceptable.
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In simple terms, a good P/E ratio is lower than the average P/E ratio, which is between 20–25. When looking at the P/E ratio alone, the lower it is, the better. For new investors, “P/E” might as well mean “physical education.”
The Price to Earnings ratio is to give you an idea of where a company is valued versus the rest of the market AND compared to other companies in the same sector. In general, the market is historically considered fairly valued when in the 15–17 range.
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 118.273. At the end of 2022 the company had a P/E ratio of 30.6.
Apple (AAPL) PE Ratio (TTM) : 38.55 (As of Jan. 14, 2025)
Thus, the evidence is overwhelming that low PE stocks earn higher returns than high PE stocks over long periods. Those studies that adjust for differences in risk across stocks confirm that low PE stocks continue to earn higher returns after adjusting for risk.
P/E ratio as of December 2024 (TTM): 15.1
According to Best Buy's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 15.0995. At the end of 2022 the company had a P/E ratio of 11.9.
A good PE (Price to Earnings) ratio in India usually falls between 12 and 20, indicating that a company's stock is neither overvalued nor undervalued. This range balances risk and growth potential, making it ideal for Indian stock market investment.
S&P 500 P/E Ratio is at a current level of 28.77, up from 27.87 last quarter and up from 23.27 one year ago. This is a change of 3.23% from last quarter and 23.62% from one year ago. The S&P 500 PE Ratio is the price to earnings ratio of the constituents of the S&P 500.
The justified price to earnings ratio is the price to earnings ratio that is “justified” by using the Gordon Growth Model. This version of the popular P/E ratio uses a variety of underlying fundamental factors such as cost of equity and growth rate.
Investors and analysts consider stocks which have a P/E ratio of 50 or above to be an overvalued share, especially in comparison to a stock which has a ratio at par with or below 10. As it allows investors to determine that its share prices are considerably higher than what a company can afford to pay as dividends.
Benchmark for Determining Value– The PE ratio is a great tool for comparing a stock's worth to the index as a whole. For example, company P's PE ratio is 19 compared to the average PE ratio of 14 for the past 20 years. Compared to the historical average, a PE ratio of 14 may be deemed undervalued today.
The average dividend yield of some of the top dividend stocks is 12.69%. The best dividend stocks are shares of well-established companies that increase their payouts over time. Investors can also choose to reinvest dividends if they don't need the stream of income. Here's more about dividends and how they work.
Traditionally, any value under 1.0 is considered desirable for value investors, indicating an undervalued stock may have been identified. However, some value investors may often consider stocks with a less stringent P/B value of less than 3.0 as their benchmark.
Now, here's the thing: If stocks' average EPS growth is rising over time, the stock market's P/E ratio needs to settle at a higher level, as well, to fairly price in the higher profit growth. That's why today's P/E ratio of around 30 isn't as alarming as it would have been in the past.
While PS ratios are not a perfect indicator of a company's value, they can be a useful tool for identifying potential risks. By avoiding companies with PS ratios above 18X, you can reduce your chances of investing in overvalued stocks that could experience significant price declines.
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