Every fund manager and investor wishes to earn more than the BSE Sensex return, which in technical parlance is referred to as generating alpha.

The benchmark indices were trading lower this week. On Friday, BSE Sensex closed on a negative note, down around 461.22 points or 0.75 per cent at 61,337.81. About 1,334 shares had advanced, 2,213 declined and 105 were unchanged.

This stock is trading at a PE multiple of 23.60 and an ROE of 1.59, all of which points to strong managerial performance.

Today, this stock closed the day on a high note, up 3.14 per cent to Rs 129.75, while BSE Energy was down 0.61 per cent to Rs 8790.45.

Valuation metrics are ratios and models that can help investors estimate how much a company is worth. Click here for more information on the Shiller PE Ratio.

Stock market analysis with the help of PE multiple is extremely popular. There could be very many reasons for PE being a favoured ratio for stock market analysis but it may not be the most appropriate way to look at PE and take investment decisions. Yogesh Supekar highlights the importance of looking beyond the PE ratio while discussing the risks of giving too much emphasis to it.