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 …

The high government debt load and monster budget deficit  are scaring many people right now. This is unquestionably the number one fear of investors and the argument most often invoked to justify an imminent fall of the stock market. For a lot of people, it is completely illogical to have used excessive debt to fight a crisis caused by… excessive debt ! They said it would have been better to purge capitalism by allowing irresponsible companies and individuals to go bankrupt.