P/E Ratio analysis

 Here lets talk about some myths, some facts about P/E ratio (Price-to-Earnings ratio) which is one of the most important fundamental tool to invest in stocks. Investors track this to look out for which stock is overvalued or undervalued compared to its earnings.

Formula of P/E ratio = Share Price ÷ Earnings Per Share (EPS).
A higher P/E usually means the stock is expensive relative to its earnings. But this is something taught theoretically, when used in practical markets it can be different.

🚨 So what should an investor do when a Stock's P/E is Too High?
Taking an eg, if a stock in a sector has a very high P/E (say above 100) like infrastructure or energy.This is a very overvalued stock for investors, but the same time smart investors start looking for other valuable stocks in the same sector.
If any other company in the same sector has a strong fundamental values but lower P/E Ratio they might be better for investments at that time.

If other companies in that industry have strong fundamentals but lower P/E ratios (say 20–30), they might be better investment opportunities.

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Financial ratios like P/E, EPS, and ROE
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