What if PE ratio is 40? A high P/E ratio, above 40, indicates investors willing to buy a stock at 40 times or more its earnings. Whether investing at a high PE ratio is good or bad depends on various factors.
Market Comparison: Compare the company's P/E ratio with the overall market average. If the market average P/E is 20 and a company's P/E is 30, it might indicate that investors are expecting higher growth from this company relative to the market.
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.
In fact, every industry or sector can have different P/E ratios. Hence, there is no standard measure of a high P/E ratio. It is always in comparison with the company's competitors and peers. If you look at the FMCG sector, most companies have a P/E ratio between 25 and 50.
P/E 30 Ratio Explained
A P/E of 30 is high by historical stock market standards.
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.
The price-to-earnings ratio (P/E ratio) is a quick way to gauge whether a stock is undervalued or overvalued. All else equal, the lower the P/E ratio, the better the investment. For this reason, a P/E of less than 20x is “good” and anything higher than 30x is “bad.”
While the ideal ratio depends on the company and industry, the P/S ratio is typically good when the value falls between one and two. A price-to-sales ratio with a value less than one is better.
Why Is a Company's P/E Ratio Important? A company's price-to-earnings ratio alerts investors to whether a company's stock is under or overvalued compared to its earnings. Investors can use this financial metric to compare one company to another in the same industry.
The market average P/E ratio currently ranges from 20-25, so a higher PE above that could be considered bad, while a lower PE ratio could be considered better. However, the long answer is more nuanced than that.
Fair Value Estimate for Nvidia
With its 2-star rating, we believe Nvidia's stock is overvalued compared to our long-term fair value estimate of $105 per share, which implies an equity value of roughly $2.5 trillion.
As far as Nifty is concerned, it has traded in a PE range of 10 to 30 historically. 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.
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.
The estimated P/E Ratio for S&P 500 Index is 26.73, calculated on 10 January 2025. P/E Ratio is calculated on the SPY Etf, whose benchmark is the S&P 500 Index.
According to JPMorgan Chase's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 14.472. At the end of 2022 the company had a P/E ratio of 11.1.
As of today (2025-01-12), Tesla's share price is $394.74. Tesla's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Sep. 2024 was $3.65. Therefore, Tesla's PE Ratio (TTM) for today is 108.15.
The PE ratio for Amazon Com stock stands at 45.9 as of Jan 10, 2025. This is calculated based on the TTM EPS of $4.77 and the stock price of $218.94 per share.
As of today (2025-01-13), Walmart's share price is $93.00. Walmart's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Oct. 2024 was $2.44. Therefore, Walmart's PE Ratio (TTM) for today is 38.16.
The mean historical PE ratio of Costco Wholesale over the last ten years is 35.42. The current 54.17 P/E ratio is 53% higher than the historical average. Looking back at the last ten years, COST's PE ratio peaked in the Nov 2024 quarter at 56.47, with a price of $964.01 and an EPS of $17.07.
P/E ratio as of January 2025 (TTM): 6.32
According to Ford's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 6.32143. At the end of 2022 the company had a P/E ratio of -23.3.
According to Toyota's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 9.18095. At the end of 2022 the company had a P/E ratio of 10.2.