PE vs RoE – The Starting Point of Valuation Check Over the years, I’ve realised one simple trick to avoid overpaying for any company — Always compare its PE with its RoE. Here’s why: – PE (Price to Earnings) tells you how much you’re paying – RoE (Return on Equity) tells you how much company is earning on its own money Basic rule: If RoE > PE → valuation is reasonable If RoE < PE → stock may be expensive Example: – Company A: PE = 12, RoE = 18 → Reasonable – Company B: PE = 24, RoE = 10 → Risky This single check has saved me from several value traps. Because profit can be shown — but return on equity is harder to manipulate