The price-earnings ratio, or P/E, is the most popular valuation metric in stock market investing. For most people, it's a shorthand way of deciding how the market regards a company. But it's also tricky concept, full of pitfalls. For example, a company with a low P/E may either be an ignored but attractive investment opportunity or a company which is deservedly cheap because it is in business difficulty.

This book is both a comprehensive handbook on the intricacies of P/E and a practical guide on how you can use, adjust and improve the price-earnings ratio to boost your stock returns:

• The different ways earnings and P/Es are calculated

• How to interpret the P/E and understand what the market is telling you about a company's prospects

• The limitations of the P/E – and how to set them right

• How to improve the P/E ratio and turn it into an even more powerful predictor of future returns, while controlling for risk

• The rich investing and trading insights that decomposing the P/E offer

• How the long-term P/E increases the traditional P/E's power to predict future returns

• How P/E helps you identify outperforming stocks

• How combining P/E with measures of high financial stability lead to outstanding and reliable investment results

• How famous investors Ben Graham, Joel Greenblatt, and Joseph Piotroski use the P/E to pick stocks to invest in.

After completing his BSc in Mathematical Statistics and Operational Research at Exeter, Keith Anderson worked for some years as a systems developer, most recently at Deutsche Bank in Frankfurt. He then did an MSc in Investment Analysis at Stirling, where he won the Morley Prize as the top academically in his year. For his PhD at the ICMA Centre, Reading University, Keith showed that different ways of calculating the price-earnings ratio could significantly improve investor returns.

Keith worked as a lecturer at Durham University Business School for two years before moving to York in 2008.