Two firms differing only in their P/E

Two companies look the same on every financial ratio except one, say the price-to-earnings ratio. Which would you invest in?

The lower P/E, if everything else really is identical. With the same earnings, growth, risk and payout, a lower P/E means you pay less per unit of earnings, so it is the cheaper stock. In practice probe why the ratio differs, since a gap usually reflects differences in expected growth, risk or earnings quality that the other ratios have missed.