In the current session, the stock is trading at $201.74, after a 6.49% spike. Over the past month, AbbVie Inc. (NYSE:ABBV) stock increased by 4.84%, and in the past year, by 44.26%. With performance like this, long-term shareholders are optimistic but others are more likely to look into the price-to-earnings ratio to see if the stock might be overvalued.

Comparing AbbVie P/E Against Its Peers

The P/E ratio measures the current share price to the company's EPS. It is used by long-term investors to analyze the company's current performance against it's past earnings, historical data and aggregate market data for the industry or the indices, such as S&P 500. A higher P/E indicates that investors expect the company to perform better in the future, and the stock is probably overvalued, but not necessarily. It also could indicate that investors are willing to pay a higher share price currently, because they expect the company to perform better in the upcoming quarters. This leads investors to also remain optimistic about rising dividends in the future.

AbbVie has a lower P/E than the aggregate P/E of 112.06 of the Biotechnology industry. Ideally, one might believe that the stock might perform worse than its peers, but it's also probable that the stock is undervalued.

In summary, while the price-to-earnings ratio is a valuable tool for investors to evaluate a company's market performance, it should be used with caution. A low P/E ratio can be an indication of undervaluation, but it can also suggest weak growth prospects or financial instability. Moreover, the P/E ratio is just one of many metrics that investors should consider when making investment decisions, and it should be evaluated alongside other financial ratios, industry trends, and qualitative factors. By taking a comprehensive approach to analyzing a company's financial health, investors can make well-informed decisions that are more likely to lead to successful outcomes.