YOU - Why You Should Bet on 5 Top-Ranked Stocks With Rising P/E | Benzinga
Investors often opt for the stock-picking approach that involves stocks with a low price-to-earnings (P/E) ratio. This strategy is based on the notion that the lower the P/E ratio is, the higher the stock value. The reasoning behind this is simple — when a stock's current market price does not adequately reflect its higher earnings, it suggests potential for growth.
But there is more to this whole P/E story. Because not only low P/E, stocks with a rising P/E can also fetch strong returns. In this regard, investors can bet on the likes of Vita Coco Company (NASDAQ: COCO), AMC Entertainment (NYSE: AMC), Hyperfine (NASDAQ: HYPR), Aptevo Therapeutics (NASDAQ: APVO) and CLEAR Secure (NYSE: YOU).
Rising P/E: A Useful Tool
The concept is that as earnings rise, so should the price of the stock. As forecasts for expected earnings come in higher, strong demand for the stock should continue to push up its prices. After all, astock's P/E gives an indication of how much investors are ready to shell out per dollar of earnings.
Suppose an investor wants to buy a stock with a P/E ratio of 30. This means that he is willing to shell out $30 for only $1 worth of earnings as he expects the earnings of the company to rise at a faster pace in the future owing to strong fundamentals.
So, if the P/E of a stock is rising steadily, it means that investors are assured of its inherent strength and expect ...