Evaluating PE Ratios

sp0om said: "Over winter break, I began to learn the basics of PE ratios. My understanding is limited and I was hoping to learn more from the more seasoned investors here. What I've got in my little ole' brain right now is that anything around 10 is healthy, 20's are a bit of a stretch, and 30+ is fairly high. Now, seeing PE ratios over 100 makes me feel that my current understanding is not right or incomplete. I've been adjusting my perception of a healthy PE ratio by looking into rough industry PE ratio averages. Any other tips on looking at PE ratios?"

HappyHarry said: "Hi, There's another key factor. It depends on how fast the company generally grows earnings. That's why a factor called PEG Price/Earnings Growth is important. If earnings grow very fast, people will place a premium on the P/E. That's why if you look at traditional fast-growers like CHS and COH, they have 30 and over P/E ratios."