How to Determine Cheap or Expensive Stock Prices?

[Suba]

As a stock investor, of course you know that not all stocks will be able to provide profits. The stock prices that we find in the capital market do not reflect the actual/intrinsic value. Investors often apply fair prices as a reference to determine whether the stock price is cheap or expensive by using ratio formulas such as: Price to earning ratio, Price to earning growth, price to book value, etc.

 

[Augusta]

Yes to know the value a stock is to compute the company's price-to-earnings ratio. The P/E ratio equals the company's stock price divided by its most recently reported earnings per share . A low P/E ratio implies that an investor buying the stock is receiving an attractive amount of value.