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Technology Stocks : WDC/Sandisk Corporation
WDC 172.26-2.2%Dec 31 3:59 PM EST
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To: Sam Citron who wrote (28084)4/27/2005 12:32:06 PM
From: Dave  Read Replies (1) of 60323
 
The problem with that methodology, i.e. P/E ratio equals the growth rate, is that one misses various Return on Capital and Capital Reinvestment requirements metrics of a business.

Admittedly, when looking at cyclicals, especially when staring at trough earnings, a P/E ratio gives you an idea of what the business is capable of when comparing peak Earnings to current price when currently in trough earnings. Other than that, the P/E ratio is quite limited.

Edit:

I recommend you read this by Michael Mauboussin.
leggmasoncapmgmt.com

Dave
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