Why the price/earnings ratio is flawed

The price/earnings ratio is a quick and simple way to look at a company’s 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 don’t use it properly.

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

• See also: EV/Ebit – boring title, sexy ratio

Video tutorial - why profit margins matter

Why profit margins are really useful

In this video, Ed Bowsher explains how to calculate a company’s profit margin, why it is the best way to evaluate profitability, and how you can use it when analysing a company.

Video tutorial: why hedge funds can be good news

Why hedge funds can be good news

Hedge funds perform a valuable service by weeding out overvalued shares. In this video, Ed Bowsher explains some of the things they look for when they’re hunting for shares to short.

Video tutorial - what is the current ratio?

What is the ‘current ratio’?

In his latest video, Ed Bowsher looks at the current ratio, which can help you see whether a company has sufficient resources to pay its bills in the near future.

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