as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
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when does a low pe ratio not indicate a good stock?
user
some companies have a steady, reliable, stream of earnings. in that case, a low p/e ratio is likely to indicate a good stock. other companies have a "feast or famine" pattern, great earnings one year, no earnings or losses the following year. in that case, it is misleading to use a p/e ratio for a good year, when earnings are high and the ratio is low. instead, you have to figure out what the company's average earnings may be for some years, and assign a p/e ratio to that.
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