Average Quote by Benjamin Graham
“Calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.”
About This Quote
Calculate the P/E ratio by dividing current price by the average earnings of the past three years.
In simple terms: P/E = price ÷ three‑year average earnings.
Use this metric to assess stock value.
Themes
Mood
Type
When to use this quote
- stock selection
- portfolio building
- financial planning
- risk assessment
Key Concepts
Questions to Reflect On
- How does this ratio compare to other valuation tools?
- When might a low P/E be misleading?
P/E ignores future growth prospects and market conditions.