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The forward price/earnings (PE) ratio is probably the most popular way to measure value in the stock market – when the forward PE is above average, the market is expensive and future returns will be low and, when the PE ratio is below average, the market is cheap and future returns will be high. Putting such popular rules of thumb aside, what does the forward PE really tell us?
Barclays’ Jonathan Glionna offers a detailed look at the history of PEs and future returns all in this one chart. Take a look and quickly be informed.
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