The Price Earning ratio or the PE ratio is the term commonly used to assess the fairness of the stock price.
PE ratio is defined as the ratio of market price to earning per share (EPS).

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PE ratio = Market price of the share

Earning per share (EPS)

For example, if a company is currently trading at $40 a share and earnings over the last 12 months were $2 per share, the P/E ratio for the stock would be 20 (=$40/$2).

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EPS in turn = Profit After Tax (EAT)

Number of shares in the share capital

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The common sense would dictate that lower Prie/Earning ratio means that the price is undervalued and higher Price/Earning ratio means that the price is overvalued. Unfortunately, it is not so simple that you would be sitting on the stock market and earning money by buying low Price/Earning ratio stocks and selling high Price/Earning ratio stocks.
In absolute terms there is no 'right' PE. One cannot say that PE of a stock of say 10 or 15 is good or bad.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower Price/Earnings. However, the Price/Earning ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical Price/Earning Ratio. The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular metric of stock analysis, although it is far from the only one you should consider.It would not be useful for investors using the Price / Earning ratio as a basis for their investment to compare the P/E of a technology company (higher Price/Earning) to a utility company (lower Price/Earning) as each industry has much different growth prospects. The P/E gives you an idea of what the market is willing to pay for the company’s earnings. The higher the P/E the more the market is willing to pay for the company’s earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stock’s future and has bid up the price.

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What is the Right P/E?

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There is no correct answer to this question, because the answer depends on your willingness to pay for earnings. For an investor the stock of a company having PE of 20 is rightly priced the other investor may consider it highly priced due to higher price earning ratio. The more you are willing to pay, which means you believe the company has good long term prospects over and above its current position, the higher the Right Price/Earning is for that particular stock in your decision-making process. Another investor may not see the same value and took your Right P/E as wrong. The positive P/E shows that in how many years you will be able to get back your investment in form of profits. A PE of 10 indicate that you will be able to get back your investment in form of profits in 10 years assuming the price and EPS constant over the time. The negative Price/Earning Ratio shows that the company is suffering losses.