What is a good P/E ratio?

There is no universal number. It depends on the sector and growth rate, so compare a company with its peers and its own history.

Why is a low P/E not always cheap?

Earnings may be falling or inflated by one-off gains, so the low ratio can be a value trap. Check why the ratio is low.

When should I use P/B instead of P/E?

P/B suits asset-heavy businesses and financial companies such as banks. P/E suits steady profit-makers, and EV/EBITDA helps compare companies with different levels of debt.

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Valuation basics: P/E, P/B and EV/EBITDA

25 Oct 2026, 6:09 pm UTC

What does valuation tell you?

A great company can still be a poor investment if you pay too much for it. Valuation ratios compare the price to what the business earns or owns, so you can judge whether the price is reasonable.

No ratio gives a verdict on its own. Use them to compare a stock with its own history and with similar companies.

What is the P/E ratio?

P/E is the share price divided by earnings per share. A P/E of 20 means you pay 20 for every 1 of yearly profit.

Valuation basics: P/E, P/B and EV/EBITDA

What does valuation tell you?

What is the P/E ratio?

What is the P/B ratio?

What is EV/EBITDA?

How to use valuation ratios sensibly

Check valuation in Eyrie

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