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.
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.
For Banks anything below 3 of P/BV value is considered to be very good. At Index level ( ie. NSE or BSE Sensex) -- P/E of 25--26 is an ideal one. If the index moves beyond these levels, that market is considered to be over valued. Generally people are comfortable if P/E at index level is within this range.
Usually, the market considers a P/E ratio below 20 as a good investment opportunity. 3. 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.
A negative P/E ratio suggests the company is currently unprofitable, as it has more expenses than revenue. It often means the company made no money over the last 12 months.
So, what is a good PE ratio for a stock? A “good” P/E ratio isn't necessarily a high ratio or a low ratio on its own. 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.
And so generally speaking, the lower the P/E ratio is, the better it is for both the business and potential investors. The metric is a company's stock price divided by its earnings per share. You shouldn't compare P/E ratios of different kinds of companies, like a tech company and a consumer staple company.
Apple (AAPL) PE Ratio (TTM) : 38.55 (As of Jan. 14, 2025)
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.
According to Tesla's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 115.76. At the end of 2022 the company had a P/E ratio of 30.6.
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 : 29.551 (As of 2025-01-08)
Compared to the historical average, a PE ratio of 14 may be deemed undervalued today. Helps in Decision Making- Investors who spend their entire lives searching for undervalued stocks to buy want an efficient method of navigating through the numerous stocks they are exposed to.
One helpful benchmark when investing is to consider that the average forward P/E ratio of the S&P 500 for the last 25 years is 16-17x. Therefore, assuming the stock you are looking at has similar or better growth and risk versus the average S&P 500 company, buying at anything less than 16x is likely a bargain.
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.
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.
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.
You can look at industry averages for key financial metrics such as revenue growth, profit margins, and return on equity. If the company consistently outperforms these averages, it might be a strong contender.
If the relative P/E measure is 100% or more, this tells investors that the current P/E has reached or surpassed the past value.
One of the most important ratios for investors to understand is return on equity, or the return a company generates on its shareholders' capital. In one sense, it's a measure of how good a company is at turning its shareholders' money into more money.
A persistent negative P/E ratio indicates that the company is consistently experiencing losses. This might signal deeper financial or operational problems such as declining revenues, poor cost management or ineffective business strategies.
As of today (2025-01-14), Palantir Technologies's share price is $64.98. Palantir Technologies's Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Sep. 2024 was $0.20. Therefore, Palantir Technologies's PE Ratio (TTM) for today is 324.90.
Google (GOOGL) PE Ratio (TTM) : 25.47 (As of Jan. 12, 2025)