1. What is considered a “good” P/E ratio?

There is no universal “good” number. It depends on the sector, growth prospects, and risk profile. For example, stable utilities might trade at a lower P/E, high‐growth tech at a much higher.

2. Is a P/B < 1 always a buy signal?

ot necessarily. While a P/B < 1 may suggest undervaluation, it could also flag asset problems, declining business, or hidden liabilities. Always dig deeper.

3. What does a low P/E ratio imply?

The low P/E ratio implies that the market did not see the full potential of the company. It may be a measure of underestimation or a low expectation of an increase in earnings.

4. What does a high P/B ratio tell?

A high P/B ratio indicates that the investors are ready to pay a high price for the book value of the company. It can show a high ratio of returns on assets or overconfidence regarding the assets of the company.

5. Which ratio is more important for banks?

For banks and financial firms, P/B often takes priority because the asset base (loans, deposits) and book value are very meaningful. P/E can be volatile.

P/E ratio Vs P/B ratio

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P/E ratio Vs P/B ratio

Stocks

P/E ratio Vs P/B ratio

Q: 2. Is a P/B < 1 always a buy signal?

ot necessarily. While a P/B < 1 may suggest undervaluation, it could also flag asset problems, declining business, or hidden liabilities. Always dig deeper.

Q: 3. What does a low P/E ratio imply?

The low P/E ratio implies that the market did not see the full potential of the company. It may be a measure of underestimation or a low expectation of an increase in earnings.

Q: 4. What does a high P/B ratio tell?

A high P/B ratio indicates that the investors are ready to pay a high price for the book value of the company. It can show a high ratio of returns on assets or overconfidence regarding the assets of the company.

Q: 5. Which ratio is more important for banks?

For banks and financial firms, P/B often takes priority because the asset base (loans, deposits) and book value are very meaningful. P/E can be volatile.

PE and PB ratio are the matrics used by value investors to get an idea of valuation of a stock, this can help investors determine if the stock is trading at higher value than the real face value or vice versa.