The thing with P/E ratios is that they are backwards looking while stock prices represent future estimations. Bankers put together detailed models to estimate

The thing with P/E ratios is that they are backwards looking while stock prices represent future estimations. Bankers put together detailed models to estimate the earnings per share in the future. Yes they are estimates, but informed as best as possible. The model spits out an estimated $/share. If the current price is lower, they think the future value of the share is actually higher than the current price, so they buy or convince others to buy.