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43. How We Value Companies When Investing

The Stocks and Savings Podcast

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Understanding Relative Valuation Methods

This chapter explores relative valuation techniques, focusing on the price-to-earnings (P-E) ratio and its limitations. It highlights the complexities of valuing companies through examples like Tesla, PayPal, and Amazon, showcasing the need for considering growth potential over mere historical profits. Additionally, the chapter introduces alternative methods, such as free cash flow assessments, to gain a more comprehensive view of a company's financial health.

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