What is a good P/E ratio?
A good P/E ratio depends on the industry, but generally: below 15 is cheap, 15-25 is fair, above 25 is expensive. Compare to sector averages for context.
P/E ratio (Price-to-Earnings) shows how much investors pay per dollar of earnings. Context matters:
**General Guidelines:** • P/E < 10: Very cheap (could be value trap or distressed) • P/E 10-15: Undervalued or mature company • P/E 15-25: Fairly valued • P/E 25-40: Growth premium • P/E > 40: Very expensive (must have exceptional growth)
**By Sector (typical ranges):** • Technology: 25-35 (high growth expectations) • Utilities: 12-18 (stable, low growth) • Financial: 10-15 (asset-heavy) • Healthcare: 18-25 (moderate growth) • Consumer Staples: 18-22 (defensive)
**Important Considerations:** • Compare to sector average, not market average • Use forward P/E for growth companies • Negative P/E means losses - use Price/Sales instead • PEG ratio (P/E ÷ Growth Rate) gives better context
A "good" P/E is one below the sector average for a company with above-average quality.
Source: Intrinsic Investor (https://www.intrinsic-investor.com)
This answer is for educational purposes only, not investment advice.