How do you know a stock is expensive? Part 2
Last week we wrote an article about how to determine whether a stock is expensive or not and used the price to earnings (P/E) ratio to explain this. There are, however, issues with this simplistic ratio. This is because it does not take into account the earnings growth as it only looks at historical earnings which may change. The price earnings ratio also does not take into account the debt the company has. The next step above the P/E ratio …