Reaching into the mailbag this week, I found this reader question: “Could you please explain PE ratios? After a recent purchase, I discovered the listed PE to be much higher than expected. My broker responded that the forward PE was in normal range and “don’t look in the rear view mirror.” Thank you for your help.” Usually people are not alone in their desire to know things, so I decided to share the answer here. If you divide a company’s stock price by its earnings per share, you’ll come up with a price/earnings ratio, or PE. This simple number...
