--- title: "Meaning & Key Takeaway of: It's nonsensical to derive a…" description: "\"It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.\" — Benjamin Graham" image: "https://sms4smile.com/quotes/i/6f3/benjamin-graham-1531_currents_it-s-nonsensical-to-derive-a-price-earni_1337757.jpg" --- # It's nonsensical to derive a price/earnings ratio by… ![“It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.” quote by Benjamin Graham](https://sms4smile.com/quotes/i/6f3/benjamin-graham-1531_currents_it-s-nonsensical-to-derive-a-price-earni_1337757.jpg) [Download](https://sms4smile.com/quotes/i/6f3/benjamin-graham-1531_currents_it-s-nonsensical-to-derive-a-price-earni_1337757.jpg) [Open image](https://sms4smile.com/quotes/i/6f3/benjamin-graham-1531_currents_it-s-nonsensical-to-derive-a-price-earni_1337757.jpg) > “It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.” [Benjamin Graham](https://sms4smile.com/quotes/author/benjamin-graham/) ## About This Quote This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation. The quote critiques using a price/earnings ratio based on current price and unknown future earnings as illogical. **In simple terms:** Using current price over unknown earnings is flawed. Key Takeaway Avoid unreliable financial metrics. Themes finance valuation logic Mood cautious analytical Type advice critical When to use this quote - stock analysis - financial planning - risk assessment Key Concepts earnings forecasts investment analysis Questions to Reflect On - How can investors better assess future earnings? - What alternatives exist to P/E ratios? A Different Perspective Future earnings are uncertain, making the ratio speculative. ★ ★ ★ ★ ★ No ratings yet [Currents](https://sms4smile.com/quotes/about/currents/) [Customer](https://sms4smile.com/quotes/about/customer/) [Derive Price](https://sms4smile.com/quotes/about/derive-price-4509505/) [Dividing](https://sms4smile.com/quotes/about/dividing/) [Dividing Known](https://sms4smile.com/quotes/about/dividing-known-4509507/) [Earning](https://sms4smile.com/quotes/about/earning/) [Earnings Ratio](https://sms4smile.com/quotes/about/earnings-ratio-1591723/) [Investing](https://sms4smile.com/quotes/about/investing/) [Known](https://sms4smile.com/quotes/about/known/) [Nonsensical](https://sms4smile.com/quotes/about/nonsensical/) [Nonsensical Derive](https://sms4smile.com/quotes/about/nonsensical-derive-4509506/) [Price Earnings](https://sms4smile.com/quotes/about/price-earnings-1591722/) [Ratios](https://sms4smile.com/quotes/about/ratios/) [Unknown future](https://sms4smile.com/quotes/about/unknown-future/) ## Related quotes > [Calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.](https://sms4smile.com/quotes/benjamin-graham/calculate-a-stock-s-price-earnings-ratio-yourself-using-graham-s/) [Benjamin Graham](https://sms4smile.com/quotes/author/benjamin-graham/) > [To know whether stocks are cheap or pricey, we typically look at price-to-earnings ratio. 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