Every investor looks at P/E multiple differently and invest accordingly. In most of the cases when a company is trading below its industrial average, it is regarded as undervalued stock but it really depends on the GROWTH and RISK of the company. If that undervalued firm has huge growth potential than it is profitable to invest otherwise not (Case is little bit different for mature firm).
Feb 02 2014 09:40 PM
People invest in high P/E also as they see company with huge growth potential.