‘To a man with a hammer, everything looks like a nail.’ – Mark Twain We cannot use a single valuation method (the hammer) to determine the worth of every stock (the nail). Companies in different industries have their own unique set of characteristics. Using the same ruler to measure the performances of all companies out there is akin to judging a fish’s ability to climb a tree — we end up thinking the fish has no potential. Similarly, to avoid missing out on investing opportunities, we don’t want to use the P/E ratio to value every stock you come across. Here’s why. The P/E ratio The price-to-earnings (P/E) ratio is one of Wall Street’s most common valuation methods. We hear the term thrown around a lot on CNBC or Bloomberg where news anchors and financial experts use the ratio to quickly assess whether a stock is ‘cheap’ or ‘expensive’....