As a rule of thumb, I’m very reluctant to buy shares of a company trading at an excessively low P/E, especially if the stock is at or near a 52-week low in price. A stock with an exceptionally low P/E ratio can turn out to be real trouble. A stock trading at a multiple of three, four, or five times earnings or at a number far below the prevailing industry multiple could have a fundamental problem. The future prospects of the company may be questionable; earnings could be headed much lower. The company might even be headed toward bankruptcy.
