Maggie asked 3 months ago
Hello, it was mentioned under the Portfolio Management segment that a PE ratio>20 indicates overvaluation and <10 indicates undervaluation. Is this PE ratio always the same, or will it change over the years?
1 Answers
Victor Chng answered 3 months ago
Hi Maggie,
It is just a general guideline. It really depend on in the interest rate environment. For instance, due to low interest rate in the United States, their market average have raise from 15x to 20x for the past 10 years.
The guideline figures is over a long term, the market should be based on those figures as index revert back to the mean.
Hope this helps :)
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