This is a continuation of the previous post on the many ways to look at the PE ratio. 3. Growth Angle As the investment world, led by brokers shifted to look at just 1 year PE ie PE using next year's earnings. A lot of imagination bloomed on how we can interpret this ratio. The most popular one being how PE can be used to tell the growth story. The rationale is simple enough: different companies and industries have different growth outlook. By looking at next yr's PE, we cannot just say that: ok, more than 15x is expensive, I am not going to buy anything more than 15x. What if the industry is growing at 30% per year? Then 15x is cheap! By right, it should trade at 30x PE (see the rule of thumb below). Hence with this argument, basically the brokers can convince anyone to buy at ...