Countless investors — individuals and professionals alike — spend their time seeking out cheap stocks with very low P/E ratios. Sometimes the stocks are cheap are a reason, they are not in favourable industries or have poor fundamentals hidden within. And as a result, the stock prices stay stagnant… sometimes for years! (That is what happened to me once!).


In addition, this creates the notion that stocks with high P/E ratios should be written off as expensive (meaning opportunities often lie hidden in this group).

The problem, though, is that a company with a high P/E ratio may not actually be expensive. A company with a P/E ratio of 50 — or higher — may be cheap. Which means…

For some companies, the P/E ratio is meaningless.
It’s a bold statement, but stick with me.


You see, the problem with the P/E ratio is that it’s a retroactive metric. …