Ask George

George Putnam, one of the country's leading turnaround and distressed investing professionals, answers your investing questions. This is your chance to find out everything you wanted to know--but were afraid to ask--about turnaround investing.

To submit your question, please click here.

How important are Price-to-Earnings (P/E) ratios in evaluating turnaround stocks?

June 28, 2012

Price-to-Earnings ratios are probably the most widely used tool for comparing the relative values of different stocks. However, they are often less significant for turnaround investors. One reason for this is the fact that many turnaround stocks don’t have any earnings to plug into the P/E ratio calculation because they have been losing money prior to the commencement of their turnaround. And even when a turnaround company has begun to show earnings, the level of those earnings may still be quite low, which leads to a misleadingly high P/E ratio. The one circumstance where I do find P/E ratios helpful is where a company has a very low P/E ratio compared to its peers. This may indicate that Wall Street may have given up on the company--depressing its stock price and increasing the gain potential.

(Question submitted by Wendy M.)

View more "Ask George" Q&A

 or submit your own question.

Profit from The Turnaround Letter's...

  • Market-Beating Investment Results
  • 28+ Years of Turnaround Experience
  • Diverse Stock Picks for Today's Unpredictable Market

Distressed Investing Blog

Distressed Investing Blog

Nothing Happened in October, Right?

The S&P 500 is up about 0.6% for the month. That makes the month seem pretty uneventful and benign. But for anyone following the stock market day-by-day, October seemed anything but uneventful and benign. Learn how contrarians can leverage this information for value stock opportunity. Read More.

Free Stock Report

 

Put George Putnam's 28+ years of market-beating, contrarian investing advice to work for you, and give your portfolio a boost with this FREE stock report.

Current Total Returns

 

Value Stock Profit

Total returns cover the fulll year 2013.

Note: Returns are not adjusted for inflation.

 

Read More.

Sample Issue

TL Spotlight

George Putnam has always followed the same straight-forward and highly-profitable investment philosophy. He published his first Turnaround Letter issue back in 1986, and readers have seen extraordinary short and long-term stock profit ever since.

 

In fact, 11 of this year's 12 sales recommendations saw gains--with five of those enjoying total returns greater than 100%. The Turnaround Letter's average profit for 2014's closed out stock picks is +82%:

 

2014 Closed Out Purchase Recommendations

Value Stock Picks

* Calculation includes dividends and price changes between purchase recommendation and current price.

 

Learn more.