[Mr. Jeeves]

Proctor and Gamble has a P/E under 19, Ford under 10, meaning yeilds of greater than 5% and 10% respectively. (P&G was under 10 P/E a few years ago.) People are not going to stop buying soap, and will probably want pickup trucks and SUVs for the foreseeable future.

That just means these companies aren't going to go bankrupt. It doesn't mean their P/E's can't end up well below 5 in a big downturn.

[Zeneta]

You are correct sir,

I find that a lot of people have no idea of what a “good” P/E number is.

Many simply think a low P/E is good and a high P/E is bad, or not as good.

The answer is: It depends.

Is the Company a growth company or an established so-called “blue chip”.

If it is an established company, then a low P/E may be a good opportunity to Buy.

If it is a growth company, then a low P/E is a problem.

I like to redefine P/E to read “Price Expectations” as opposed to “Price Earnings ratio”. A low P/E on a growth company would suggest investors have low expectations for this company, since they have not bid up the price. A high P/E for a growth company suggests that investors have high expectations, since they have pushed prices higher.

There are certainly exceptions to this as well as most rules for valuing a company, however you must recognize that finding a growth company that “nobody else” has found yet, would be extremely rare.