Understanding the Price-to-Earnings (P/E) Ratio
Worked Example: These Figures Today
The companies used as examples above, with the current figures behind them. Illustrations of the metric — not a ranking, not a shortlist, and not a recommendation.
| Ticker | Company | Price | Change | Market Cap | MoonshotScore |
|---|---|---|---|---|---|
| AAPL | Apple Inc. | $343.91 | -1.10% | $5.0T | 89 |
| MSFT | Microsoft Corporation | $532.60 | +1.54% | $4.0T | 85 |
| TSLA | Tesla, Inc. | $391.62 | +5.21% | $1.5T | 57 |
P/E Ratio in Context: Examples
“MoonshotScore V2 note de 0 à 100 les actions ordinaires et ADR éligibles de NASDAQ, NYSE et AMEX par rapport aux entreprises du secteur, selon cinq piliers : qualité de l’activité, solidité financière, valorisation, durabilité de la croissance et momentum. Les ETF, titres OTC et cotations hors des États-Unis sont exclus. Un score V2 absent n’est pas remplacé par V1. Outil de recherche, pas un conseil financier.”
Questions worth resolving before acting on the screen
What does a high P/E ratio indicate?
A high P/E ratio may suggest that a stock is overvalued, or that investors anticipate higher earnings growth in the future. It's important to compare the P/E ratio to those of competitors and industry benchmarks.
What does a low P/E ratio indicate?
A low P/E ratio can suggest that a stock is undervalued, or that the market has low expectations for future earnings growth. However, it could also reflect underlying problems with the company.
What are the limitations of using the P/E ratio?
The P/E ratio does not provide a complete picture of a company's financial health. It should be used in conjunction with other financial metrics and qualitative factors. Also, negative earnings result in an undefined P/E ratio, making comparisons impossible.