Right now, Daktronics Inc. DAKT share price is at $5.03, after a 3.07% gain. Moreover, over the past month, the stock fell by 11.75%, but in the past year, spiked by 12.28%. Shareholders might be interested in knowing whether the stock is overvalued, even if the company is 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 30.43%.

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The P/E ratio measures the current share price to the company's earnings per share. It is used by long-term investors to analyze the company's current performance against its 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 shows 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.

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

Compared to the aggregate P/E ratio of the 150.52 in the Electronic Equipment, Instruments & Components industry, Daktronics Inc. has a lower P/E ratio of 32.53. 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.

P/E ratio is not always a great indicator of the company's performance. Depending on the earnings makeup of a company, investors can become unable to attain key insights from trailing earnings.