The higher the PE ratio, the more investors believe the business will generate strong earnings growth in the future to justify the price today.
Even excluding the technology sector, which trades at a robust 30.8 times earnings, the market's PE is a solid 18.3 times next year's earnings, according to FactSet.
One place investors scour is the list of low PE stocks, which they perceive as offering attractive value because they are "cheap."
First, when growth stocks are in their early stage of expansion, they can grow earnings in the high double-digits range.
Then, we grouped these equities into quintiles based on their relative PE ratio from highest (1 st quintile) to lowest (5 th quintile).
Persons:
Karen Firestone
Organizations:
Microsoft, Apple, Nike, Asset Management, Traders, New York Stock Exchange