Is PE even anything? If you guided your investing based on sane PE ratios for the past decade you would have been consistently unhappy with missing out on huge gains in tech companies.
PE is appropriate for companies going steady. It's not appropriate for companies that are growing or dying.
Thought experiment: A and B have the same earnings per share, but everyone expects A to double its revenue going forward and B to go steady. Should shares of A go for the same price as shares of B? If you think so, I can front-run you.
Thought experiment 2: A and B have the same earnings per share, but everyone expects A to halve its revenue going forward and B to go steady. Should they go for the same price? If you think so, I have some bags for you to hold.
The easy answer is that PEG is more appropriate for growing companies and PB is more appropriate for dying companies (since this is HN, I'll also mention that "Team and TAM" is the metric for seed stage). The hard answer is that there is no substitute for modeling the finances of the company and applying a DCF, but your brokerage app can't do that for you so PE/PEG/PB still have their place.
In the long run, I believe yes. PE also would not have been helpful in the late 1920s or late 1990s. But things tend to revert.
One of the reasons why different companies have different p/e for a long time is expectation of growth. So META has had a pretty high P/E, but then E has been growing really fast. GM's earnings don't grow so past so the P/E is low. And capital efficiency also hurts P/E.
Disclaimer: I believe stocks represent fractional ownership of an actual company and are ultimately (but not always) valued as such. You can make an argument that financial instruments are just driven by sentiment, supply and demand, and have no correlation to actual reality.
Thought experiment: A and B have the same earnings per share, but everyone expects A to double its revenue going forward and B to go steady. Should shares of A go for the same price as shares of B? If you think so, I can front-run you.
Thought experiment 2: A and B have the same earnings per share, but everyone expects A to halve its revenue going forward and B to go steady. Should they go for the same price? If you think so, I have some bags for you to hold.
The easy answer is that PEG is more appropriate for growing companies and PB is more appropriate for dying companies (since this is HN, I'll also mention that "Team and TAM" is the metric for seed stage). The hard answer is that there is no substitute for modeling the finances of the company and applying a DCF, but your brokerage app can't do that for you so PE/PEG/PB still have their place.