What PE ratio to BUY?

Many investors in the stock market like to talk about PE ratio, what is it exactly?

PE ratio = Price Earning Ratio
PE ratio = Share price / EPS (EPS=Earning Per Share)

This is one of the common tools many people use it to get a quick indication of whether the share price is reasonable given the company's earnings. Meaning to determine whether a stock is fairly valued.

What PE ratio to BUY?
There is no fix answer for this. It will be meaningful if you compare the PE ratios within the same industry and overall market to gauge if the stock is overpriced.

Misconception
Low PE = Cheap & you should buy the stock.
High PE = Expensive & you should avoid the stock.
This is not true. Sometimes a high PE ratio does not mean the stock is expensive because the stock may have high growth prospects in its future earnings. Growth investor don't mind buying high PE stock because they expect the companies's earning to improve in the future.

Conclusion
Generally I will buy only companies with trailing PEs of 10 or less. As what Warren Buffett is doing. On top of that, Lower PE means a shorter time period to recoup your investment and it's also more resilient to market crashes.