The problem with the PE ratio is that it creates problems not only on the selling side, but also on the buying side. Due to his high P/E for companies, he often sells wealth creators early and regrets or buys when they are substantially overpriced. Despite its own limitations, it’s still better to use the PEG ratio.
11 minute readlast update:
From investor presentations to research reports, the price-to-earnings ratio (PE) is one of the most abused and misused ratios in valuation matrices. Widely used to justify valuations and create a mirage of value. But is this the correct matrix? The answer is no. There are better options. Given that one financial ratio can make a big difference in what is worth and what looks cheap, relying on PE can often lead to wrong results.
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