From a long-term perspective: This ratio increases the probability of being right in the quest for wealth creation

There is something about the simplicity of the PE ratio that attracts investors to it. It is straightforward to understand: If the PE is high, it means the stock is over-valued. So, low PE stocks are the ones to target. However, following the PE formula has its pitfalls. In many cases, it may lead to lost opportunities in terms of wealth creation. It is also flawed when it comes to valuing stocks in certain sectors. What, then, is the alternative?