[Verse 1] Stock price divided by earnings per share That's the magic number floating in the air Trailing twelve months shows what profits came before Forward-looking estimates predict what's in store When the ratio climbs high, investors might beware Could signal overvalued stock hanging up there [Chorus] P-E ratio, price to earnings flow High means expensive, low means cheap to go Twenty times earnings, is that steep or fair? Compare to rivals, see what markets share P-E ratio, the valuation key Unlock the secrets of what stocks should be [Verse 2] Justified P-E tells us what it ought to trade Based on growth rates and the profits being made Dividend discount models crunch the perfect score If market P-E's higher, might be time to explore Technology companies often wear a premium crown While utilities and banks keep ratios down [Chorus] P-E ratio, price to earnings flow High means expensive, low means cheap to go Twenty times earnings, is that steep or fair? Compare to rivals, see what markets share P-E ratio, the valuation key Unlock the secrets of what stocks should be [Bridge] Industry matters when you're making calls Retail and pharma have different protocol walls Growth stocks command a multiple that's steep Value hunters seek the ratios buried deep Negative earnings make the ratio break Use other metrics for analysis sake [Chorus] P-E ratio, price to earnings flow High means expensive, low means cheap to go Twenty times earnings, is that steep or fair? Compare to rivals, see what markets share P-E ratio, the valuation key Unlock the secrets of what stocks should be [Outro] Price divided by earnings Simple math for stock discerning Forward, trailing, justified too P-E ratios guide investment crew
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