When can you trust a p/e ratio?

P/e ratios are widely regarded as a good measure of the valuation of a stock. But rather than just take it for granted, Tim Bennett is digging a bit deeper and asking - just how reliable is a p/e ratio?

The price/earnings (p/e) ratio crops up everywhere, from newspapers to websites to analysts' reports. But just how reliable is it as a valuation measure?

A refresher

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.