Goldman Sachs Group Inc (GS), Apple Inc. (AAPL), Verizon Communications Inc. (VZ): Is That ‘Cheap’ Stock Worth It? Use This Tool To Find Out

On the other hand, Verizon Communications Inc. (NYSE:VZ), with a P/E ratio of about 130, could be a buy with a P/E ratio near the lower Bollinger band.

Value investing is appealing to many individual investors because it seems logical. The idea is to buy stocks with low P/E ratios and avoid those with high P/E ratios. Unfortunately, the absolute level of a P/E ratio tells us very little about whether an individual stock is a value stock or not. Adding Bollinger bands to the P/E ratio could help investors find unusually cheap stocks and could help them to avoid stocks that are overvalued on a relative basis.

Action to Take –> When selecting value stocks, consider the P/E ratio within context and decide whether it is high or low based on the history of the P/E ratio for the stock you are looking at.

This article originally appeared at ProfitableTrading.com
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