# How unusual is a Price to Equity Ratio of 90?

**URL:** <https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475>\
**Category:** In My Humble Opinion\
**Created:** [June 8, 2013, 3:21pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475 "2013-06-08T15:21:38Z")\
**Posts on this page:** 5\
**Page:** 1

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**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\
**Post date:** [June 8, 2013, 3:21pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475/1 "2013-06-08T15:21:38Z")

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I’m looking at the stock of a Fortune 1000 US company.  
It’s old, but losing money for the last quarter or so. It had been profitable prior to that for quite a while.  
The P/E is freaking 90.  
Dividend/Yield is around 0.3 and 3.6.  
Does that mean the market is gambling on earnings to recover in the future, or is the market saying “it will survive, and we like dividends”.  
Thanks in advance!

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**Author:** ![squeegee](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/squeegee/32/14537_2.png) [@squeegee](https://boards.straightdope.com/u/squeegee)\
**Post date:** [June 8, 2013, 5:21pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475/2 "2013-06-08T17:21:42Z")

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I’m no expert investor, but a P/E (“price to earnings”, btw) of 90 is high but not insanely so. [Here](http://www.stockrageous.com/peratioHigh.jsp)’s a list of the stocks with the highest P/E’s, some of which go into the thousands.

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**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\
**Post date:** [June 8, 2013, 5:31pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475/3 "2013-06-08T17:31:18Z")

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At the risk of rephrasing the obvious, there are two _very different_ ways to get High P/E – high price, or low earnings.(\*) Note that if P/E grows _for the latter reason_, it can suddenly flip from being a large positive number to a large negative number!

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**Author:** ![sevenwood](https://avatars.discourse-cdn.com/v4/letter/s/6de8d8/32.png) [@sevenwood](https://boards.straightdope.com/u/sevenwood)\
**Post date:** [June 8, 2013, 8:09pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475/4 "2013-06-08T20:09:20Z")

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Note that the P/E ratio you’ll see in the stock reports uses the _ **current** _ price and _ **historical** _ earnings. That makes sense, because statistically that’s all they’ve got.

Investors tend to make investments based on _ **expected** _ earnings, so if, say, a pharmaceutical company has just announced that they’ve developed a new drug the P/E ration of their stock could well soar.

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**Author:** ![OldGuy](https://avatars.discourse-cdn.com/v4/letter/o/3bc359/32.png) [@OldGuy](https://boards.straightdope.com/u/OldGuy)\
**Post date:** [June 8, 2013, 10:41pm UTC](https://boards.straightdope.com/t/how-unusual-is-a-price-to-equity-ratio-of-90/660475/5 "2013-06-08T22:41:11Z")

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It’s not at all uncommon. Any time a company stock actually trading has negative earnings, the PE ratio is more than infinity. There are lots of cases of this.