P/E remains one of the most used metrics to value stocks. It is very easy to compute. But it’s not always easy to interpret. « Most investors fail to have a clear sense of what a particular multiple implies about a company’s future financial performance and don’t understand how multiples change over time », according to Michael Mauboussin and Dan Callahan in a report published in 2014 by Credit Suisse (this article is mainly based on their note which you can read here).
Valeo share price reaction to 2017 results and 2018 forecast seems to rely on an apparent decoupling : orders intake are booming but return on capital and cash conversion don’t keep up.