What does Warren Buffett say about p/e ratio?

Written by Editorial Team | Last Updated: August 2026

Warren Buffett views the price-to-earnings ratio as a useful, quick screening metric for evaluating stocks, but he frequently warns that relying on it as a standalone decision-making tool is a dangerous mistake. He stresses that a low price-to-earnings ratio does not automatically mean a stock is a bargain, because the company might be a melting ice cube facing secular decline or structural obsolescence, while a high price-to-earnings ratio can sometimes be entirely justified for an exceptional business possessing an impenetrable economic moat and immense future earnings growth potential. Buffett teaches that investing is never about mechanical formulas like P/E multiples, but rather about determining a company's true long-term intrinsic value by projecting future cash flows and discounting them back to the present. Therefore, the P/E ratio is merely a starting point for deeper fundamental analysis rather than a definitive verdict on whether a security represents a wise investment.

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