Suppose, for example, you buy a stock earning $1 per share and selling at $7.50. If the earnings grow to $2 per share and if the price-earnings multiple increases from 7½ to 15 (in recognition that the company now can be considered a growth stock), you don’t just double your money—you quadruple it. That’s because your $7.50 stock will be worth $30 (15, the multiple, times $2, the earnings).
