When looking at companies with low PE ratios, do you look at the past years PE (say 3 years) and the forward PE, to get an idea on the sustainability of the low PE. I won't to keep away from Value Traps!! I won't to use David Dreman's investment style and have decided to use low PE or low FCF ratio as my valuation model.
Thanks heaps !!!
Personally I do not pay attention to the historical P/E. Some do so, and if it's below say the 5year P/E the stock seems to be undervalued. I like to compare ratios like the P/E or P/FCF to the industry median. But to avoid a value trap these should of course not be the only ratios. I would advise against relying only on such undervalued/overvalued parameters. So you need to analyse more fundamentals.
