For investors, evaluating the pe ratio is a long-standing research practice. However, in a quantitative study last month, Bank of America Merrill Lynch pointed out that the pe ratio is no longer an effective indicator.

The study shows that nearly 80% of investors surveyed by the bank regard the forward pe ratio as the top factor when investing. However, the study also shows that since 2010, stocks with lower pe ratios have consistently underperformed the market.

Savita Subramanian, stock and quantitative strategist at Bank of America Merrill Lynch, wrote in a report to clients: "Although stocks with low pe ratios have been weak for most of this bull market (such stocks have lagged behind the market by 46 percentage points since 2010), low pe ratios remain the most popular stock indicators for the 14th consecutive year."

The pe ratio is the current stock price of a stock divided by its eps. The forward pe ratio includes analysts' expectations of a company, or the estimated eps.

So why do stocks with low pe ratios underperform the market? Bank of America Merrill Lynch points out that when everyone invests based on the pe ratio, its advantage has already been lost and absorbed by the market. Subramanian said that stocks with low pe ratios are more likely to be arbitrage taken away in the next year.

The increase in growth investments has also led to poor performance of stocks with low pe ratios. In contrast, value investors try to buy companies at lower valuations and bet on the company's earnings to improve. Growth investors, on the other hand, are already buying expensive stocks and expect the company's earnings to continue to grow at the same rate or even higher.

The pe ratios of FANG group are all relatively high, which are typical growth stocks that have largely driven the stock market up in recent years.

The leverage ratio is the second most popular factor, i.e., net debt/EBITDA. Beta, size, and earnings expectation adjustments are other popular metrics.