In the current market session, American Electric Power Inc. AEP is trading at $87.52, after a 0.49% decrease. However, over the past month, the stock went up by 2.98%, and in the past year, by 4.66%. 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.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently below from its 52 week high by 7.10%.

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.

Depending on the particular phase of a business cycle, some industries will perform better than others.

Compared to the aggregate P/E ratio of the 20.41 in the Electric Utilities industry, American Electric Power Inc. has a lower P/E ratio of 19.9. Shareholders might be inclined to think that the stock might perform worse than its industry peers. It's also possible that the stock is undervalued.

There are many limitations to price to earnings ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.