Investing in stocks is often a solitary sport where independent thinking is a valuable quality. This does not mean that our success depends to 100% of our ideas. Fortunately for us, there are brilliant investor, with an incredible talent for wealth creation and who are little known to the public (this is not an article on Warren Buffett). The beauty of stock markets is that they allow us to partner with such a specimen when we finds one. What’s easier than buying some shares and then leave it to our “new partner” with the task of working heart and soul to our enrichment!

The publicly traded companies that post strong revenue and profits growth for many years in a row have proved to be excellent investment. Holding one of these stocks in a portfolio can make all the difference between mediocre performance and above average results. Companies such as Microsoft, Wal-Mart and Starbucks have incredibly enriched their shareholders over the years.

The price / earnings ratio is probably the most famous and most used financial ratio in the investment world. It is calculated by dividing the price of a stock by its earnings per share for a twelve months period. For example, a stock trading at $ 10 and having achieved $ 0.50 in earnings per share over the last twelve months will have a price / earnings ratio of  20 (10 / 0,50 = 20). While it is fairly simple to calculate, its interpretation has many subtleties. Here are some that must be taken into account to determine if the price / earnings ratio for a stock is attractive or not …