Many finance bloggers like to quote Warren Buffett’s saying “price is what you pay; value is what you get”. However, knowing this is one thing, practicing it is another matter altogether which requires some level of deep analysis. The fact is that you can’t determine the intrinsic value of a company just by staring at the figures stated in the quarterly or annual financial statements. According to MorningStar’s “Why Moats Matter”, there are generally two approaches when it comes to valuation concepts. How do investors identify great companies? One of the simple tools to value company is through using earnings yield, or more commonly known in the investment community as Price/Earning (P/E) ratio. This simple method requires only current share price divided by the last 12 month’s earning. Companies with high P/E ratio are considered growth stocks. There are pros and cons in using P/E ratio to measure the ......