why company with a low P/E is more attractive? Thanks.
you get a higher earnings at the same price… you paid 20$ for a share - got 10$ earnings… vs. you paid a 100$ for a share and got 10$ earnings…
It’s not that simple. There is evidence that investing in low P/E stocks tends to achieve higher returns on average, all else being equal. Low P/E could just as easily mean that the market believes that future prospects for the firm aren’t great, with earnings that are expected to remain stagnant or deteriorate.
this question is confusing at best. a stock could have a low p/e but higher than it’s peers in the industry, so it may not be as attractive. I think the empirical evidence is for the small stocks and the P/B ratios (the FF factors).