- A video that explains this
- The 10th minute
- P/E – Price per earning, let’s assume all compatitors for the same stock, has a value of 30.
- Meaning Earning X 30 = Market cap.
- Market cap / (P/E) = Expected earning
- If the company to analyze, earns less then that company might not be so effective in terms of making money, or doesn’t worth the stock price.