That's a great point, d4now. However, the p/e ratio, by itself, excludes the most important factor in stock valuation - earnings growth %.
When I value a stock, the first thing I look at is p/e ratio. Next, I look to see, based on earnings growth % over the past 5 years and expected next 5 years, how long it will take for the "e" to equal the "p." The sooner the better (because of less risk).
For example: ABC trades at $10/share; the p/e ratio is 20/1; the earnings growth is 50%; the stock earnings equal a 1/1 p/e ratio in year 6; and thus the present fair market value of the stock is around $47 (taking the earnings growth over 30 years and discounting it by an estimated 30-year note rate of 5.5% (currently it's actually 5.38%)). I'd buy that stock at $10 (in fact, I'd buy longer term call options on it).