10 Highest P/E Ratio Stocks

Today's guide is about the list of well-known companies with the highest P/E ratio stocks.

You can sort the list of companies with the highest P/E ratios by MarketRank, how the media feels about them, and what analysts think. Users can often sort it by country, sector, and market capitalization.

Please think of this guide as a bird's-eye view of how companies are valued concerning their price to earnings. This may help you find opportunities that are under or over-valued.

What are P/E ratio stocks?

The price-to-earnings Ratio (P/E ratio) is a way to determine how much a company is worth by comparing its current share price to its earnings per share. 

Some people call the price-to-earnings Ratio the price multiple or the earnings multiple. The term P/E Ratio is just one way to figure out how much a stock is worth, but it is very common.

The P/E Ratio is a quick way for investors to compare companies in the same business. The stock is more expensive concerning how much it makes if the P/E Ratio is higher. Any company whose stock trades on a public exchange can figure out its P/E Ratio. 

All you need is the company's most recent earnings per share (EPS) number and the current share price. The number for EPS is available on the income statement for the company.

This is how you figure out the P/E Ratio: P/E Ratio = Share Price divided/ Earnings per Share (EPS). For example, let's say that each share of Company XYZ is worth $50, and its EPS for the last quarter was $5. The P/E Ratio for company XYZ would be 10 (($50 $5) = 10).

When the P/E Ratio is higher, investors pay more for each dollar of profit. When the P/E Ratio is lower, investors pay less for each dollar of profit.

But the P/E Ratio only tells you some of what you need to know. The earnings of a company with a high P/E ratio might grow faster than the earnings of a company with a low P/E ratio.

A company having a low P/E ratio might be in a declining industry or be a value stock trading at a discount to its true value. This Ratio is just one way to determine how much a stock is worth. 

Before deciding to invest in a company, it is important to look at its financial statements, business model, competitive advantages, and growth prospects.

Why is the P/E Ratio important?

The P/E Ratio explains how much you'll need to invest for every $1 in earnings as an investor. Muoz says, "This is a quick and easy way to evaluate a stock and compare it to its peers."

For example, if the P/E Ratio is 10, you can expect to get back $1 for every $10 you invest. If the P/E Ratio is higher, you'll have to invest more money for every dollar you make. And if it's lower, you can put in less money to get $1 back.

Investors look for low P/E ratios to get a good deal on an undervalued company.

Braun-Bostich says that the P/E Ratio doesn't show if a stock is growing, losing money, or has a lot of debt. She says that many start-ups and growth stocks have P/E ratios that are "astronomical." Because of this, it's important to also look at other facts.

List of 10 highest P/E ratio stocks 

Goosehead Insurance (NASDAQ: GSHD) Stock

A licensed insurance broker in the United States, Goosehead Financial LLC specializes in coverage for individuals and families. Goosehead Financial, LLC is owned by Goosehead Insurance, Inc. 

A business's operations can be broken down into two distinct tiers: the Corporate Channel and the Franchise Channel. 

In addition, standard forms of insurance like homeowners, auto, dwelling, flood, wind, earthquake, excess liability/umbrella, motorcycle, RV, general liability/property, and life are all available through the agency.

 There were 2,151 franchises under the company's wing by the end of 2021. The Westlake, Texas, headquarters of the insurance company Goosehead Insurance, Inc. dates back to 2003.

Aris Water Solutions (NYSE: ARIS) Stock

Aris Water Solutions, Inc. is a provider of water management and recycling solutions, as well as environmental infrastructure and services. 

The company mainly focuses on collecting, transporting, and otherwise dealing with non-recycled produced water from the oil and natural gas industry. Its water solutions division constructs and operates recycling plants to collect, treat, and repurpose wastewater. 

The company launched in 2015, with headquarters in Houston.

Cars.com (NYSE: CARS) Stock

Cars.com Inc., through its subsidiaries, operates a national online marketplace for automobiles that links consumers with dealers across the United States. 

The business offers web-based services linking potential car buyers and sellers with automotive OEMs and information resources. Also, the company makes money through direct and affiliate sales of its online subscription advertising products to car dealerships.

Companies from all over the country can buy display ads from the company. 

Cars.com, Auto.com, DealerRater.com, NewCars.com, PickupTrucks.com, DealerInspire.com, and LaunchDigitalMarketing.com are all part of its online marketplace for automobiles, which brings together buyers and sellers. 

The company's website is used by roughly 20,000 franchised and independent car dealers, and it features nearly 5 million listings for new and used vehicles. The Chicago, Illinois headquarters of the Cars.com Company dates back to 1998.

Donegal Group (NASDAQ: DGICA) Stock

Donegal Group Inc., a holding company in the insurance industry, offers insurance products for both businesses and individuals. It is divided into the Investment Function, the Individual Lines of Insurance, and the Business Lines of Insurance. 

The company offers insurance for private passenger vehicles, covering claims arising out of injuries and damage to property. These policies also cover automobile damage. 

In addition to auto insurance, the agency provides coverage for homeowners against losses resulting from fire, lightning, high winds, and theft, as well as the insured's legal responsibility for any injuries or property damage sustained by third parties.

Iridium Communications (NASDAQ: IRDM) Stock

Businesses, governments (including those of the United States and other countries), non-governmental organizations (NGOs), and individual customers worldwide purchase services and products from Iridium Communications Inc.

The business provides push-to-talk, broadband data, and IoT services in addition to mobile voice and data satellite communications for postpaid customers and mobile voice satellite communications for prepaid customers.

Data services such as hosted payload, satellite time and location services, PSTN (public switched telephone network) connections, SMS (short message service), SIM (subscriber identity module), activation, and reactivation are also available. 

In addition to offering voice and data solutions, the company also sells devices that can best keep tabs on individuals or pieces of machinery.

Insulet (NASDAQ: PODD) Stock

Insulet Corporation is in the business of providing insulin delivery systems to people with insulin-dependent diabetes. 

The Omnipod System includes the self-adhesive disposable tubeless Omnipod device worn for up to three days and the wireless companion, the handheld personal diabetes manager. 

In addition to selling its products directly in the USA, Canada, Europe, the Middle East, and Australia, the company also sells through independent distributors and pharmacy channels. 

The Insulet Corporation is a privately held company with its main offices in Acton, MA.

Red Violet (NASDAQ: RDVT) Stock

Red Violet, Inc. is a well-known software and services company that uses its technologies and analytical skills to give people in the United States information about their identities. 

It has idiCORE, an investigative solution to organizational problems like due diligence, risk mitigation, identity authentication, and regulatory compliance. 

Plus, it also has FOREWARN, an app-based solution that gives professionals instant information about a consumer before they meet them face-to-face and helps them find and reduce risk. 

The company works with companies in financial services, insurance, health care, retail, telecommunications, and healthcare. It also works with law enforcement, government agencies, and firms in collections, corporate security, and investigations.

Helmerich & Payne (NYSE: HP) Stock

Since its founding in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) has made it its mission to provide unmatched drilling productivity and reliability. 

H&P operates at the highest integrity, safety, and innovation standards to provide its clients and investors with the best value. 

The company's subsidiaries develop high-performance drilling rigs worldwide for use in conventional or unconventional oil and gas fields. 

H&P also develops and implements cutting-edge tools for survey management, directional drilling, and other forms of automation. 

H&P operates a fleet of 299 land rigs in the United States, 31 land rigs in other countries, and eight offshore platform rigs.

American Axle & Manufacturing (NYSE: AXL) Stock

American Axle & Manufacturing Holdings, Inc. and its subsidiaries develop and manufacture driveline and metal forming technologies for use in electric, hybrid, and internal combustion vehicle applications across the Americas, Asia, and Europe. 

Driveline and Metal Forming are the company's two primary divisions. Light trucks, SUVs, crossovers, passenger cars, and commercial vehicles can all benefit from the Driveline segment's front and rear axles and electrical and hybrid driveline products and systems.

Compass Diversified (NYSE: CODI) Stock

Compass Diversified is a private equity firm that focuses on add-on acquisitions, buyouts, consolidation of industries, recapitalization, and investments in the late-stage and middle markets. 

It wants to invest in niche industrial or branded consumer companies, manufacturing, distribution, consumer products, the business services sector, safety and security, electronic components, food, and food service. 

The company likes to put its money into companies in North America. It wants to put between $100 million and $800 million into companies whose EBITDA is between $15 million and $80 million. 

The company wants to own a majority share of its portfolio, and it can buy more platform companies. This company makes investments through its balance sheet. Most investments are held for five to seven years. 

Compass Diversified was started in 2005 and had an office in Westport, Connecticut, and Costa Mesa, California.

What is a good P/E ratio?

That depends on the business sector and sometimes even the company.

In one industry, P/E ratios in the 30s might be seen as a good number, while in others, they might be in the 20s or even the 10s. Braun-Bostich says, "The S&P 500 is around 26." "That's 62% more than the average."

So, when figuring out P/E ratios, you should compare companies in the same sector or use the average P/E Ratio to determine where the company falls on the major bell curve.

You might also find it helpful to compare a company's P/E Ratio to what it was at the same time in the past. 

For example, you could look at a company's Q4 performance over the past five years to see if it's going up, down, or staying the same. This can help you determine if the company is getting too expensive or getting a better deal over time.

You can also take similar points from several companies in the same industry to see if performance affected the whole industry or just a few companies. 

If a company always does better than its competitors, you might have found a winner, no matter how the market is doing.

How can you calculate the P/E Ratio?

P/E comprises the price per share and the earnings per share (EPS).

Most stock screeners make it easy to find a stock's price, but you might have to look around for the EPS or figure it out yourself.

The earnings per share (EPS) is the company's total profit divided by the total value of its shares. Say a company is worth $7 billion and has 4 billion shares in circulation. This means that each share of stock earned $2. Put that number into the formula for P/E.

If the current price of a share of stock is $40, you will divide $40 by $2, which gives you a P/E ratio of 20. Then you can see if the company is priced too high or too low compared to others in the same sector.

Using the same example also means earning $2 for every $20 you invest because the P/E Ratio is 20.

Factors to consider before investing in the highest P/E ratios stocks

When it comes to investing in stocks, earnings are only one part of the story. Here are a few other things to think about:

Revenue and earnings growth

Eventually, a company's share price will follow its earnings growth. So, it's important to look at how a company's sales and profits have changed over time to understand where the stock price might be.

Profit margins

A company's profit margin shows its competitiveness and efficiency.

Amount of debt

A company with a lot of debt needs help to repay its loans, which could cause its stock price to drop sharply.

Cash flow

A company's ability to bring in cash is important because it can pay its bills and put money back into the business.

How can you manipulate the P/E Ratio?

Earnings are a good way to see how profitable a company is, but they can be changed by management using accounting techniques. So, the P/E Ratio may only sometimes be a good way to measure a company's stock price.

There are many ways to change how much money someone makes. For instance, a business can count revenue when it is earned instead of when it is received. 

This can artificially boost earnings in the short term and make the P/E Ratio look better than it would otherwise. Expenses can also be put off, which has the opposite effect.

Accounting techniques can also help companies even out their income. This can make earnings look more stable from one period to the next, even if the business isn't doing well. This can make the P/E Ratio seem lower than it is.

FAQs: Questions people often ask

Is a PE of 5 a good number?

PE of five or fewer could be a lot better. Even though it might seem like the company's future is being looked at too negatively, it's a good idea to avoid companies with a PE below this level.

Is it good for a stock to have a high PE ratio?

The stock may be overpriced if a company's PE ratio is much higher than its peers. A different way to think about the PE ratio: It shows how much investors pay for each dollar of a company's earnings. Imagine that there are two similar businesses in the same field.

Which PE ratio is the safest?

Again, these ratios are often used to compare things, so what's good or bad depends on what you're comparing it to. To give you an idea of the market average, many value investors would say that the P/E Ratio ranges from 20 to 25.

Is a PE ratio that goes down good?

A negative P/E ratio means the company loses money or makes less than it is worth. Even the most well-known companies go through slow times, which things outside the company's control may cause.

Final thoughts

Remember that calculating P/E ratios are for more experienced investors, so don't worry if this seems hard to understand. It is. 

A low-cost broad index market fund is an excellent choice if you don't want to worry about whether companies are overvalued or undervalued. It makes it easier to start investing and takes the guesswork out.