P/E Ratio

After the recent highs, the conversations around valuation have resurfaced. But before you decide to change your allocation based on whether the market is expensive or not, looking at the price-earnings (PE) ratio can help assess valuation.

Here’s what the PE could indicate.

HIGH P/E: Investors willing to pay higher price today because of growth expectations in the future

LOW P/E: Undervalued because their stock price trade is lower relative to its fundaments.

The PE of two portfolios can be different depending on the type of stocks they hold. For example, if you have invested in a large-cap fund, the PE can look lower compared to a small- and mid-cap fund. So never compare dissimilar portfolios.

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*Disclaimer: Views expressed are for informational purposes only and do not constitute any Financial Advice whatsoever. Please consult a financial advisor and read offer documents carefully before investing.

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