Shareholders might be interested in knowing whether the stock is overvalued, even if the company is not performing up to par in the current session.
The P/E ratio is used by long-term shareholders to assess the company’s market performance against aggregate market data, historical earnings, and the industry at large.
A lower P/E indicates that shareholders do not expect the stock to perform better in the future, and that the company is probably undervalued.
It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.
Ideally, one might believe that NXP Semiconductors Inc. might perform better in the future than it’s industry group, but it’s probable that the stock is overvalued.