Value Line University

Using P/E Information

You can use the P/E as a factor to help evaluate whether or not to buy a particular stock at a particular time.

1. If you believe that earnings are going up and that the current price/earnings ratio will be maintained, you might want to buy now, because you may benefit from a future earnings increase.
2. If the earnings estimate is for continued growth but the P/E is already high, you may want to wait for a dip in prices in the market as a whole for an opportunity to buy without paying more than you want to for the stock based on the total return you anticipate.