1 Metric All Investors Should Consider Before Buying a New Stock
In 1999, Barron's published an article titled "Amazon.bomb," which predicted the e-commerce company's impending demise. The author of the piece repeatedly cited Amazon's lack of profitability as an indication that the business was poorly run and highly overvalued.
Hindsight being 20/20, it's obvious Barron's got it wrong on the quality of Amazon's management team. And yet, 23 years later, we find ourselves in a similar environment, with skeptics making familiar claims about less profitable growth companies.
To be fair to the critics, stocks did become highly overvalued in the last couple of years. But history has shown us that you cannot rely on a single valuation metric like the price-to-earnings (P/E) ratio, to judge the quality of a company.
Source Fool.com
