What P/E ratio is really meant?

It basically means how much higher you're willing to pay for a business that earning $X amount of money. P/E ratio 3 means 3 times from the earning. For instance, if a company earns $1M net profit a year and you're will to pay $3M for it, then the P/E ratio is 3. 

In listed business, it is hardly you can find any company with P/E ratio 3 which is ridiculous low. In stock market, the average P/E ratio is 15.  That means investors are willing to pay 15X higher than the company earning. 

P/E ratio itself is useless or meaningless. It is probably more useful (but probably still useless) if you compare it with the company competitors from the same industry. It is useless because a good company usually has high P/E ratio because investors are willing to pay more for it. On the other hand, low P/E ratio doesn't really mean cheap.

What I usually look at is the historical P/E ratio of a company and study the trend. Below is the P/E ratio for A2M company from 2016 to 2021.

As you can see, the average P/E ratio is around 40 (exclude the initial high P/E ratio from 2016). If the P/E ratio is under 40 (which is now), then the current stock price is under valued. I think this gives you more meaningful information than looking at P/E ratio itself or even compare P/E ratio with other companies in the same industry.

So that is how I make use of P/E ratio. If I have to look at one single ratio itself, I will say PEG ratio which is another indicator whether the current price is undervalued or overvalued.