Purchasing stocks at the right time can maximize your return on investment, especially if you plan to buy and hold shares toward a short-term or medium-term financial goal. A stock’s P/E ratio can give you an immediate idea of whether a stock is trading at, below or above fair value.
While the average P/E ratio varies by industry, most analysts consider a stock with a P/E ratio below 25 to be potentially undervalued by the market.
