I love the price/earnings ratio, but like all investment tools, it is flawed. This is because it is only as good as the numbers that go into it.

There is no debate about the “p” in the equation – price is quoted every second. But the “e”, though readily available, is only as good as the best estimates.
Many people describe the stock market as cheap. After all, at 18 times earnings, p/es are half of what they were eight years ago (those bubbly valuations are not coming back anytime soon) and only three points above their …