Lesson 2: P/E — Paying for Earnings. The most-quoted multiple. Useful when earnings are real and stable. Misleading the rest of the time.
How long to earn the price back?
No formula needed — just divide.
Assessment
A small business earns a steady $10,000 a year in profit. An investor pays $150,000 to buy it and expects profits to stay roughly flat. Ignoring growth, how many years of profit does that price represent?
Just divide 🤔