Hi! I'm still educating myself about stock market, I hope you don't find my question too basic. According to: http://www.nasdaq.com/symbol/fb/pe-ratio Facebook's PE ratio is 83.15. Does that mean FB is overpriced and prone to heavy fluctuations? Is it this kind of stock which "long term investor" should avoid? However, it's estimated to be 20.41 in 2018. Why? Is the stock expected to fall, or the earnings to skyrocket? What are those predictions based on"?
Hi PE stocks are usually ones that are experiencing rapid growth, or the expectations there of. In the case of FB, if somebody is estimating a PE of 20 in 2018, its because they expect the earnings to rise.
Welcome aboard Kiri! P/E ratio can be a good measure of a stock but also be unreliable at times.There are other ways to kick the tires and here is a few for FB
AMZN PE is 191, not too bad considering it was in the 1000's once PE alone is not a good indicator, for growth stocks.
