Why A Negative P/E Happens and What to Use Instead

The Investing for Beginners Podcast - Your Path to Financial Freedom · Jun 22, 2026 · 40m

Ever pulled up a stock and noticed the P/E is negative—then immediately wondered if the company is “cheap” or just a disaster? In this episode, Stephen and Andrew break down exactly why a P/E ratio “breaks” when earnings go negative, what that actually tells you (and what it doesn’t), and why a negative P/E should be treated as a big red flag—but not an automatic walk-away.

They cover the three most common reasons you’ll see a negative P/E (real operating losses, one-time accounting noise, and heavy reinvestment/hypergrowth), then walk through practical alternatives you can use to evaluate…