Hoping someone can provide some insight for me. If a company I work for a major furniture store has a P/E of 1.17 is this a bad sign. The share prices have gone from about $8-$9 down to 98cents in 6-7 months. They also stopped paying dividends.
by 
jpc
ANSWERS: 1
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A PE that low indicates that the market believes that the company is in some finanical stress. Remember that PE is a historic figure (in other words, the company made about 84cents earnings LAST YEAR) and therefore its level is indicative of what the market beleives is happening next year. So, to put it differently, if the company you work for earns, say, 8cents per share this year, then its PE will go back up to about 12.25x (98 cents / 8 cents earnings)--- which is perhaps back to a level where it was previously. So basically, the market is telling you that earnings are going to drop DRAMATICALLY in your company. That doesnt necessarily mean it is going bust, but it does mean it is taking serious financial strain. Does the above help at all?
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