I am a newbie to stock market. I was looking at the P/E ratio of companies and I find several companies, especially in the FMCG sector trading more than 40. Even bigger companies like EICHER Motors and Voltas trade above P/E ratio of more than 40.
I do understand that P/E ratio is just one part of the story and there may be legitimate reasons that a company may trade much about that. However, even discounting the reasons such as earning growth, is it possible to have so many companies (I don't have the exact number and I could not find a source where I could look at only the P/E ratio of companies in India.).
Put another way, does it make any sense to purchase stocks in companies with P/E ratio of more than 40. The nifty price to earnings ratio is around 20 I believe.
Thank you for any inputs
I do understand that P/E ratio is just one part of the story and there may be legitimate reasons that a company may trade much about that. However, even discounting the reasons such as earning growth, is it possible to have so many companies (I don't have the exact number and I could not find a source where I could look at only the P/E ratio of companies in India.).
Put another way, does it make any sense to purchase stocks in companies with P/E ratio of more than 40. The nifty price to earnings ratio is around 20 I believe.
Thank you for any inputs