◆Altys · Money, Explained

What does an 'expensive'
stock even mean?

Two imaginary shops. Two very different price tags.

Shop A
₹15
for every ₹1 it earns each year
₹1
Year 1
₹1
Year 2
₹1
Year 3
A's earnings are standing still
Rip-off?
Shop B
₹60
for every ₹1 it earns each year
₹1
Year 1
₹1.3
Year 2
₹1.7
Year 3
B's earnings are growing fast
You are not paying for today's ₹1.
You are paying for all the future ₹1s.
But if the growth never comes,
the ₹60 tag was a trap.

Cheap and expensive are guesses about
the future, wearing price tags.

The takeaway

Every price tag
is a prediction.

This ratio has a name, P/E.
Now you know what it is really saying.

Illustrative shops, not real companies. Educational only, not investment advice.

altys.ai · tryaltys.ai/blog