Price to Earnings Ratio

When I look at a stock, the first thing I look at is the P/E ratio. In essence, this tells me how much I will paying for the companies earnings. A P/E ratio of 12 means you would be paying $12 for each dollar of earnings. Now a days the Forward P/E ratio has taken prominence for the most part over the traditional, backwards looking P/E ratio but I think this is misguided. Focusing on only what you think the company will do ignores what the company has already done. So lets delve into the P/E ratio. Continue reading “Price to Earnings Ratio”