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I’m not a skilled investor, particularly when it comes to short-term prognostication, and my long-term track record has yet to be established considering my first investing decision was less than ten years ago. I don’t invest in many individual stocks. My 401(k) includes company stock as part of my employer’s matching contribution, and I opted into a stock purchasing plan where I can buy more company stock at a discount. Other than that, I’ve only invested in a few companies here and there.When I do invest in companies, I look mainly at stock price. I’m not trying to outsmart the market — any information I have about a company must already be common knowledge and included in the stock price, though David Adler, author of Snap Judgment, argues the market isn’t that efficient.I tend to ignore the price to earnings (P/E) ratio, though savvier investors consider this calculation more relevant for making trading decisions that the stock price. The P/E ratio is the price of one share of stock divided by the company’s earnings per share of stock, a financial line item public companies report on a quarterly and annual basis.This can be helpful when comparing one company to another or one company to its industry average. A lower P/E ratio, particularly if the ratio is low when compared with similar companies or the industry average, could mean that company’s share price is a good deal. It could also mean there may be an underlying problem at that company.Jeremy Siegel points out the P/E ratio for the stock market as a whole since World War II has been 15.2, implying the current lower P/E ratio of the overall market of 13 signals a good time to invest in the stock market. Wikipedia claims the P/E ratio for a longer stretch of time, the past 130 years, has been 12.1. That makes it more difficult to determine whether now is a good time to invest in the stock market.The strategy of investing when an investment’s P/E is lower than what it should be, considering the company’s competition, relies on an assumption that investments eventually return to the mean — and in order to do so, worse-than-average performance must be followed by better-than-average performance. Reversion to the mean sounds like a solid approach, and it may hold true for long periods of time or diversified investments measured as a group, but any one investment may not follow that pattern in the time period you envision.Do you look at P/E ratios when you invest?The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!P/E Ratios