Ratio Analysis

The price-to-earnings ratio (P/E) is probably the most widely used, and thus misused investing ratio.

One should Compare Apples to Apples and not apples to orange:

Different industries have different average P/E ratios. So when you compare P/E ratios it has to be with respect to the industry standards.You cannot compare P/E ratios of HLL and Infosys as the profile of both the companies is
completely different.

Also one has to check the trend of the P/E ratio of company over the years. With out the considersation of above stated scenarios its foolish to analyse an investment option with the use to P/E ratio.

Also the price-to-earnings ratio is a useful measure, but it must be used with many other metrics to accurately assess a company's worth.