Accounting

Price/Earning Ratio ( PE ) = Market Price / Historical Earnings.
Market Price is quite sensitive to the effecient market. The projected current earnings may give an impact to this PE ratio. For example, if the Current Earnings is projected to be reduced by half as in industry average, the present PE ratio should then be reduced by a half. Unless the market is very efficient, the present high PE ratio maybe unchanged which give a misleading measurement of that stock for the unchanged market price you paid. In principle, the current market price should be reduced by a half relative to its current earnings reduced by a half.