Most of you already know this but I will explain this for those of you that are new to stock analysis.

P/E - Price Earnings Ration

The P/E is a measure of a company's valuation based on its current stock price divided by its Earnings Per Share (EPS)

For example, I just looked at Hasbro which is trading at $75.68 and has an EPS of $4.05. Thus, 75.68/4.05=18.69.

The key is comparing the P/E of companies in the SAME sector. I would not compare Hasbro against Amazon which has a P/E of 104.02. However, I would compare Hasbro against Mattel (MAT) which is losing money and thus has a P/E of $-0.62 and thus does not have a P/E ratio since it is negative.

Thus, if I wanted to trade a stock in the Toy sector Hasbro would be the better buy over Mattel if one were just looking at the P/E ratio.

There are a number of sites that give an average P/E ratio by sector such as.

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html

I never use just one indicator or one statistic. I mix technical analysis with financial statistics.