PE ratio alone cannot be a determinant!

In evaluating small cap stocks, most investors consider a company's price-to-equity (PE) ratio as the ultimate testament of its valuation with regards to its peers. With a lack of or very few peers to compare with, relying solely on PE to determine valuations can often be misleading. Look into the company's long-term growth trajectory along with other factors like opportunity size, growth prospects, margin performance and ROCE (Return on Capital Employed) as major parameters to assert reasonable valuations for a particular business.