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To: Mel Viticus who wrote (10873)	4/7/1998 1:25:00 AM
From: PsycProf	Respond to of 27968

Mel is right. If company ABC earns $1.00 per share and the stock trades at $20.00 than it has a P/E ratio of 20. A "good" P/E ratio is a bit of a catch-22 however. If a stock has a low P/E ratio (i.e. under 20) it could mean it is hot and undervalued or that it isn't widely followed and few investors care enough to buy it. A high P/E ratio could be good because it may mean excitement surrounding the company and its prospects or it could be bad because it might be overvalued. This is why I think the P/E ratio is merely a piece of the research puzzle that needs to be done before investing. I do not think that it is the whole answer to a company's worth like some like to believe. The above are just the opinions of a guy who teaches psychological statistics. They are not meant to be taken as fact!