One of the ways to value a company is to multiply its earnings with the PE Ratio of its peers in the markets. PE is Price to Earning ratio. For example if a companies stock price is US$ 10 and earning per share (EPS) is US$1 then the PE ration is 10/1 = 10. If the companies earnings are US$100, then the value is US$1,000 Earnings x PE (100X10)
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E).
Let look at the PE of leading cloud company Amazon and how it stacks up against its peers.
Is it unusual to see Amazon at 300 PE and its other peers at 14-19 ? Let me know why you think so.