The First Cut: Low P/E Relative
by John Bajkowski
The price-earnings ratio (P/E), or earnings multiple, is one of the most popular measures of company value. Value investors analyze companies with low price-earnings ratios hoping to find stocks mispriced because of market neglect or overreaction to bad news.
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The P/E relative is often used to judge whether a companys price-earnings ratio has strayed too far from its normal range.
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