It should be pointed that if 20 times average earnings is taken as the upper limit of price for an investment purchase, then ordinarily the price paid should be substantially less than this maximum. This suggests that about 12 times earnings may be suitable for the typical case of a company with "neutral" prospects.
We must emphasis also that a reasonable ratio of market price to average earnings is "NOT the ONLY" requisite for a common stock investment. The company must be satisfactory also in its "financial set-up and management," and not unsastifactory in "its prospects."
From this principle there follows another important corollary, viz.: "An attractive Investment is An Attractive Speculation." This is true because, if a common stock can meet the demand of "conservative" investor that he get full value for his money 'plus' not unsatisfactory future prospects, then such an issue must also have a fair chance of appreciating in market value.
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