There is no universal number: it depends on the sector, growth and interest rates. The useful question is not "is it low?" but "is it reasonable against its own history and its peers, and why?".

Does a low P/E mean the stock is cheap?

Not necessarily: it often means the market expects earnings to fall (cyclicals at the peak, declining sectors). An unexplained low P/E is valuation's equivalent of the dividend trap.

What if the P/E is negative?

The company is losing money and the ratio stops making sense. Those cases are valued with other metrics (sales, cash flow, book value) — and with more caution.

P/E Ratio | Wiki Por Dividendos

The P/E ratio (price-to-earnings) measures how many times a company's annual earnings you are paying when you buy its stock. It is the market's most popular valuation metric — and one of the easiest to misread when used alone.

P/E = Share price / Earnings per share (EPS)

If a stock trades at €60 and earns €4 per share, its P/E is 15: you are paying 15 years of current earnings. Read in reverse (1/P/E), a P/E of 15 equals a 6.7% annual earnings yield.

How to interpret it

As a very general reference: below 12 the market is pricing in problems or low growth; between 12 and 20 is reasonable mature-business territory; above 25, the price embeds high growth expectations — which the company will have to deliver.

But the absolute number says little: a P/E of 25 can be cheap for an expanding tech company and a P/E of 8 very expensive for a declining business. The useful comparisons are against the company's own history and its .

P/E Ratio

How to interpret it

The P/E traps

P/E and dividends

Frequently asked questions