What are useful P/E and P/B reference levels?
P/E of 15 or below and P/B of 1 or below can be starting thresholds. Compare within an industry and review growth and profitability.
Estimated results
- P/E = share price ÷ EPS
- P/B = share price ÷ BPS
- A low ratio may reflect deteriorating earnings
- Compare peers using consistent accounting and dates
Questions
What P/E is inexpensive?
Fifteen is a simple reference, but appropriate multiples depend on the industry, growth and earnings quality.
Is P/B below one a buy signal?
No. Profitability and the quality of reported assets also matter.
These are illustrative estimates. Taxes, prices, dividends, fees and returns can change.