Financial Accounting Blog

Sunday, January 25, 2004

PE Ratio.'s article titled "10 Things You Should Know Before You Buy A Stock" touches on P/E ratios as a means of valuation.
It's wonderful to find a company such as eBay (EBAY:Nasdaq - commentary - research) whose earnings are growing exponentially. But the other side of the equation is the value the market pays for that growth and the prospect of future growth. There are several basic methods of determining a company's valuation: Price to earnings, price to sales, etc. These numbers can be easily found on Yahoo!, Morningstar and a slew of other Web sites. While price-to-earnings multiples, or P/E multiples, aren't the perfect gauge, investors need to consider how much they are paying for a stock.
Rod B. 1/25/04