Understanding how stocks compare to their industry peers helps you spot bargains or overhyped stocks.

Example:
- In the automobile sector, average P/E is 18
- Tata Motors at P/E 10 may be undervalued
- Maruti at P/E 20 may be overvalued — unless it's growing faster

💡 If a stock's P/E is below the industry average, it might be undervalued — but always check why!