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It's a common misconception to think a low P/E represents good value. Some businesses trade on low P/E multiples precisely because they are poor businesses which are of little value. In contrast a company trading on a high P/E may still represent good value if it is able to consistently produce high returns on invested capital.The second important point is not to confuse P/E's as a measure of value. Here is an article explaining why.
It's a common misconception to think a low P/E represents good value. Some businesses trade on low P/E multiples precisely because they are poor businesses which are of little value. In contrast a company trading on a high P/E may still represent good value if it is able to consistently produce high returns on invested capital.
The second important point is not to confuse P/E's as a measure of value. Here is an article explaining why.
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