Among the investment profession there is some contention around how reliable P/E ratios are as a decision-making tool. While they can be useful when looked at in context, used in isolation, they can mislead investors who don’t fully understand all the factors affecting the measurement. Buying shares based on their P/E ratio alone is not a good strategy, but they can be helpful for comparing two companies in the same industry.
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What is a P/E ratio?
Buying shares based on their P/E ratio alone is not a good strategy, but looking at price to earnings can be useful when taken in context.
