PE Ratio

[BuffaloRedleg]

One thing I dont understand totally is the PE ratio. There are some stocks that i've read that are predicted to well but have PE ratios much higher than the current share price. Ive seen the opposite for stocks that arent predicted to do much. How does that work?

Price of Share/earnings per share

For example of have one stock of A and is 20.00 per share and the EPS is .61, the PE is 32.78.

The price of share B is 6.24 and the EPS is .79, the PE is 7.94.

Stock A has a higher PE but a lower EPS than Stock B. Does that mean that Stock B is a better stock to invest in, all other things equal? For the sake of argument to we can say they are in the same business sector too.

[treydawg]

I had a great reply typed out and then I accidentally hit refresh :angry:

Simply put, no. P/E ratio is just another metric investors use to research a stock. Would you rather have bought AAPL than MOT a year ago? Both are in the same sector and AAPL's P/E was significantly higher than MOT.

Some times you have to pay for quality. The leader of a sector will usually have the highest P/E. Investors are willing to shell out money for leaders.