in the current market session ppl inc nyseppl is trading at 2950 after a 01 decrease however over the past month the stock increased by 268 and in the past year by 1016 shareholders might be interested in knowing whether the stock is overvalued even if the company is not performing up to par in the current session assuming that all other factors are held constant this could present itself as an opportunity for shareholders trying to capitalize on the higher share price the stock is currently under from its 52 week high by 397 the pe ratio is used by longterm shareholders to assess the companys market performance against aggregate market data historical earnings and the industry at large a lower pe can either represent a companys poor future earnings potential or a buying opportunity relative to other stocks it shows that shareholders are less than willing to pay a high share price because they do not expect the company to exhibit growth in terms of future earnings depending on the particular phase of a business cycle some industries will perform better than others ppl inc has a better pe ratio of 2611 than the aggregate pe ratio of 2154 of the electric utilities industry ideally one might believe that ppl inc might perform better in the future than its industry group but its probable that the stock is overvalued there are many limitations to price to earnings ratio it is sometimes difficult to determine the nature of the earnings makeup of a company shareholders might not get what theyre looking for from trailing earnings