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Market timing and PE as a guide

Question: How do you know if a share price is too high? Are PE ratios a guide, what about future earning, sales growth, debt/ equity ratio etc. Is there something else that is a helpful guide to determine if the stock is a hold or sell or buy?

Answer (By Paul Rickard): There is no right or wrong answer. More common measures around pricing include Price/Earnings (PE) and Price/Book (PB) ratios.

In terms of whether a stock can justify a high PE or PB, you would also consider sales or revenue growth, profit or EPS growth, return on equity, and in particular, how these compare to their competitors. As it is a global market for capital, these comparisons will also consider companies operating in different market places.