How can I arrive at the fair valuation of the stock using PE ratios ?

Question

owlfred · Answer

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anonymous · Answer

You may use the method of "market comparisons" thus find comparable companies (from the same industry, almost equal market capitalization etc.) and use the following formula: Price of the share of the company subject to valuation / Its P/E ratio = Price of comparable company / Its P/E ratio.

anonymous · Answer

Thanks for answering. Can we consider the price of comparable company/Its PE ratio as the fair value ?
Or should I take an average of 2-3 comparable cos PE ratio