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Why the price/earnings ratio is flawed

The price/earnings ratio is a quick and simple way to look at a company’s valuation. But it can be seriously misleading if you don’t use it properly. Ed Bowsher explains how it works and why it can mislead.

The price/earnings ratio is a quick and simple way to look at a companys valuation, and is widely used by private investors.

However, you do have to be careful when you use it. The ratio has several flaws and can be seriously misleading if you dont use it properly.

In this video, I explain how the ratio works and why it can mislead.

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See also:EV/Ebit - boring title, sexy ratio

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