My thought process with the P/E Ratio is that it is the quickest way to figure out if a stock price is reasonable.

As an example if ABC company's stock is selling for $20.00 a share and it earned $2.00 per share last year it would have a trailing P/E of 10. ($20.00 divided by $2.00)

I have heard also from professionals that many investors will not buy a stock that has a P/E ratio higher than 15. It is said that Warren Buffett will only buy stock in companies that have a trailing P/E that is less than 10.

Also if a company has a PE greater than 100, One should start questioning why it is so high and question whether it will take >100 years just to gain one's money back..

Thanks for your time
T