N of 1 on Nostr: Because a stock price is the present value of people’s estimation of a firm’s ...

Because a stock price is the present value of people’s estimation of a firm’s earnings in perpetuity. High price to current year earnings is just an indicator that people think earnings have a great deal of growth potential. It’s not the most robust metric because it compares an estimated financial value with a known accounting value, but then again, much of accounting is estimation also.