How do investors decide if a stock is cheap or expensive? They don't just look at the stock price; they look at Valuation.

The most common quick-glance metric is the P/E Ratio. It basically asks: How much are investors willing to pay today for $1 of this company's current profit?

• A low P/E ratio (e.g., 10) means the company is mature and stable, but not growing fast (like Ford or a utility company).

• A high P/E ratio (e.g., 50 or 100) means investors expect massive future growth. They are willing to pay a premium today because they believe profits will skyrocket tomorrow (like Tesla or Nvidia).