Looking into the current session, Lovesac Inc. (NASDAQ:LOVE) is trading at $52.29, after a 0.1% drop. Over the past month, the stock decreased by 10.01%, but over the past year, it actually went up by 68.40%. With questionable short-term performance like this, and great long-term performance, long-term shareholders might want to start looking into the company's price-to-earnings ratio.

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 45.25%.

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 can either represent a company's poor future earnings potential or a buying opportunity relative to other stocks. 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.

Most often, an industry will prevail in a particular phase of a business cycle, than other industries.

Lovesac Inc. has a better P/E ratio of 31.32 than the aggregate P/E ratio of 13.68 of the Household Durables industry. Ideally, one might believe that Lovesac Inc. might perform better in the future than it's industry group, but it's probable that the stock is overvalued.

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.