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I don't understand how to read into P/E ratios. Wouldn't a low ratio imply both a lack of investment by the company in itself and a lack of confidence by invest
by mindvirus 6y ago
I don't understand how to read into P/E ratios. Wouldn't a low ratio imply both a lack of investment by the company in itself and a lack of confidence by investors in long term prospects?
- joshribakoff 6y agoIt’s just the price to earnings ratio. Literally all it means is you divide the price and earnings. There is no canonical way to “read into” it, however typically higher P/E ratio means the market is pricing in growth or is (perhaps overly) optimistic, a lower p/e means the market does not anticipate as much growth and thus will only pay a price that is justified by the earnings (meaning people buying it intend to recoup the investment through dividends or because they thought the market sentiment about lack of growth was wrong)