Some stocks like sbux, and nke have continuously increasing PE ratio. Is this a sign of company doing well or a bad sign that company is slowly getting overvalued ?

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    It is a sign that the market is valuing the company more than it used to compare to its earning record. That's it. If you want to know if the company is doing well or not, You should look at their financial statements. – oldergod Oct 29 '15 at 0:10

PE in isolation does not tell anything. A higher PE as mentioned by oldergod just means that the market is believing that this company will do good in future


A better measurement than PE, of whether a company is doing well is are the earnings increasing year after year. This gives an indication that the company is growing and if it continues it will eventually be worth more.

If the PE is increasing then it means that the price is increasing faster than the earnings, or that the earnings are falling faster than the price, or worst combination is price is increasing whilst earnings are decreasing.


PE can not tell you very much. The average is 20-25, if a company is above that they are expected to grow. The basic ratio is market value / income production or price per share / earnings per share

There is also "trailing" and "forward" PE ratios you can consider, here's a good article: https://www.investopedia.com/articles/investing/041013/differences-between-forward-pe-and-trailing-pe.asp

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