P/E Ratio

The P/E ratio is the most commonly cited valuation metric in investing. A P/E of 20 means investors are paying $20 for every $1 of annual earnings. High P/E ratios (30x+) suggest investors expect strong future growth. Low P/E ratios (10x or below) may indicate a cheap stock — or a business in decline.

The market's average P/E over long history is approximately 15–17x. During bubble periods, it can reach 30–35x. During deep bear markets, it can fall to 8–10x. The forward P/E uses expected future earnings (more relevant for growing companies) while the trailing P/E uses the last 12 months of actual earnings.

Example: In early 2021, Tesla traded at a P/E above 1,000x — implying investors expected massive earnings growth to justify the price. By late 2022, Tesla's P/E had collapsed to around 20–30x as earnings grew and sentiment cooled. Buyers at 1,000x P/E suffered significant losses.

BMInsider's 100X Insider Reports always contextualize P/E ratios against historical averages, sector peers, and growth rates — because a 30x P/E on a 30% earnings grower (PEG of 1.0) is very different from 30x on a 5% grower.