The price/earnings (p/e) ratio tells us how much investors are willing to pay for a dollar of current earnings. in general, investors regard companies with higher p/e ratios as being less risky and/or more likely to enjoy higher growth in the future.

The price/earning ratio are a good indicator in investing in a company stock, however p/e ratios are not the only ratios to look at. In regards to higher p/e ratios, it depends on the industry and comparing them to another company in the same industry. The company with the higher p/e might be the better company to invest in.