Something to consider:
The Deadly Sin: Greed
Are you aware of what a P/E is?
It’s the price you pay times the earnings. So, a 20PE is 20x the annual earnings of a stock.
Why would anyone ever p...
Because a stock price is the present value of people’s estimation of a firm’s earnings in perpetuity. High price to current year earnings is just an indicator that people think earnings have a great deal of growth potential. It’s not the most robust metric because it compares an estimated financial value with a known accounting value, but then again, much of accounting is estimation also.