By SIMON CONSTABLE
The price of a stock doesn't tell you anything about
whether it's a good deal, but the so-called price/earnings ratio can
help. The trick is figuring out which P/E ratio to use.
Obviously, just because one stock is $200 a
share and another $12 doesn't mean the latter is cheaper in terms of
what you're getting. For a better gauge, you need to calculate what you
are paying for each dollar of company earnings. Hence, the P/E ratio,
derived by dividing the price of the stock by one year of per-share
earnings. So if one stock has a P/E of 12 and the other of 10, the
latter is cheaper. Read original story here.
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