Does P/E Ratio Matter? The Trade Desk vs. Chevron
Some stocks enjoy expensive valuations, while others are consistently valued as bargains based on their price-to-earnings ratio. Why is this? Broadly speaking, a price-to-earnings ratio (P/E) is far from a complete stock valuation metric.
Here we will dig deeper into just how to value a company, and why one company's P/E may be consistently different from another's. Let's use The Trade Desk (NASDAQ: TTD) and Chevron (NYSE: CVX) as our examples.
Price-to-earnings ratio measures a company's valuation vs. its earnings power. It can be calculated by dividing a company's share price by annual earnings per share, or by dividing its market cap by annual net income.
Source Fool.com
