No, priced earnings multiple is like a beginning, one beginning, one very useful reference

point to think about what the company is, what they're worth, what the market is valuing

that at the moment.

And so with that lens, it's the starting point of valuation.

Hey, why is, it's the starting point for these kinds of conversations.

Why is it? Or what is kinds of conversations. Why is it?

Or what is the market pricing?

Why is it that the price to earnings ratio would be higher than average?

Are there fundamental reasons related to the company's performance that will be less than

the market average?

So it's the starting point where we can start to flesh out those conversations about

companies.

I'm Mary Long, and that's Patrick Badalado.

He's a professor of accounting at the University of Texas at Austin's McComb's School of Business and a return guest on Motley Fool Money.

My colleague, Ricky Mulvey, caught up with Battalado for a conversation about how we put

a price tag on companies. They also

discuss why PE ratios get a bad rap and how to make that metric more useful, the value

lovers that Walmart could pull to double its earnings, and Netflix's expansion opportunities

beyond subscriber growth.

Patrick, I know why financial analysts want to spend time building cash flow models and why accountants are able to use this language to communicate valuations. But why should regular

retail investors that are, you know, investing a couple hundred bucks in the stock market every

month, why should they spend the time valuing the companies that they own?

...