The P/E ratio in isolation, however, tells us nothing about the business’s capital intensity, cash flow generation, management quality, or balance sheet strength, or about the expected duration of its competitive advantage period. There’s a lot more to making money in the stock market than just looking at P/E ratios. (Every investor should diligently study the white papers titled “What Does a Price-Earnings Multiple Mean?” and “The P/E Ratio: A User’s Manual” by Michael Mauboussin and Epoch Investment Partners, respectively.
