Sir could you please elaborate P/E ration little more. what actually it mean, if for example ,Company A have P/E ratio 70 and Company B have P/E ratio 20?. also is it mean high P/E ratio means it takes more time to repay the investment? also when investing why its so important for investors to invest in a company which have high P/E even though the investment will be returned after years?
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P/E ratios clarifiction
5y ago#1A higher PE ratio would only mean that it would take longer to get back the investment if it was the case that the earnings were expected to stay constant.
In most case however investors are expected earning to grow in the future. The higher the expected growth than the higher will be the share price, and because the PE ratio is the share price divided by the current earnings, then the higher will be the PE ratio.
Higher PE's always indicate that investors are expecting higher growth in the future.
I do explain this in my free lectures.
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