Login | July 28, 2026
Valuation Shortcuts
Motley Fool
Published: July 28, 2026
Q. Are there any quick and easy ways to figure out if a company is over- or undervalued? -- P.M., Hickory, North Carolina
A. Even if you undertake many calculations, it's hard, if not impossible, to determine for sure what a stock is really worth -- and, therefore, whether it's over- or undervalued. Even smart stock analysts will likely arrive at different numbers for any company they study because they all make different assumptions, such as the company's growth rate.
Still, there are indeed some quick and easy ways to get a rough idea of valuation. One is the price-to-earnings (P/E) ratio, dividing a company's stock price by its annual earnings per share (EPS); it can sometimes be helpful to use the EPS expected over the coming year. A low P/E suggests a low valuation, though it's smart to compare it with peers' P/E ratios and its own five-year P/E range. The P/E shows how much you'd be paying for each dollar of earnings.
You might also check out the price-to-sales (P/S) ratio, which divides the company's market capitalization (its market value -- the total value of all its shares outstanding) by its annual revenue (sales). This is especially handy when a company has posted losses rather than profits, making the P/E ratio moot. The P/S shows how much you'd be paying for each dollar of revenue.
Q. Where can I see how quickly home values are rising in my area? -- S.R., Honolulu
A. At sites such as EyeOnHousing.org, Realtor.com/research and Zillow.com/home-values, you can look up home price growth rates for the U.S., each state and/or many counties and metropolitan regions. Good real estate agents can supply such info, too.
Fool's School
History-Based Guides to Investing
It's generally profitable to glean investing insights and tips from those who have studied stocks and the stock market for a long time. One such person is former University of Pennsylvania professor Jeremy Siegel, who has collected and reviewed data on investment returns going back to 1802.
His book "Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies," features seven "guides to successful investing." Here's a recap:
1. "Keep your expectations in line with history." Siegel points out that, after accounting for inflation, stock market returns have been between about 6% and 7% historically, but might fall to 5%.
2. "Stocks are real assets and ... excellent long-term hedges against inflation." A share of stock, after all, represents a small ownership claim on a real asset-owning business.
3. "Stock returns are much more stable in the long run than in the short run." He adds that people with longer investment horizons "should hold a greater proportion of their portfolio in [stocks] and a lower proportion in bonds."
4. "Invest the largest percentage of your stock portfolio in low-cost stock index funds that span a global portfolio." Broad index funds, such as S&P 500 index funds, have performed well over long periods and are especially good for those of us who aren't expert investors.
5. "Invest at least one-third of your [stock] portfolio in international stocks."
6. "Tilt your portfolio toward value [stocks]" by favoring "those with lower prices relative to their fundamentals, such as earnings and dividends" -- as they "have superior returns and lower risk than growth stocks."
7. Have "firm rules to keep your portfolio on track." He urges investors to keep emotions in check and not act out of anxiety or fear.
My Dumbest Investment
Didn't Invest in a Time Machine
My most regrettable investment move was not investing in a time machine so I could go back to the late 1990s and buy stock in Apple!
Actually, my most regrettable move was about 20 years ago; I listened to a friend who'd had modest success in the stock market, and he casually mentioned Silicon Graphics (SGI) as a smart buy. We all know what happened then: stiff competition, rapid market share contraction, the stock nose-diving, then Chapter 11 bankruptcy. The lesson: Friends are good for friendship, not stock advice! -- J.S., Mountain View, California
The Fool responds: We'd love to have bought a time machine, too -- a $10,000 stake in Apple in mid-1999 would be worth more than $7 million today!
Your friend steered you wrong, but each of us should do our own research into any recommended company before buying. Don't assume that anyone will be prescient about any given stock.
Also, if you're going to invest in individual stocks, you must accept that some will disappoint you. To minimize losses, try to keep up with your holdings so that you can notice when a company is struggling. At such times, determine whether the problems seem to be temporary or long-lasting, and then decide whether to hang on or sell. Selling for a loss can hurt, but it's better than experiencing a bigger loss. And there are always other attractive stocks to move money into.
Foolish Trivia
Name That Company
I trace my roots back to 1898, when I received my first orders for minicars with innovative direct transmissions. Later models were widely used as taxis -- even delivering soldiers to battle in World War I. (I built ambulances and aircraft engines then, too.) I eventually expanded into buses, trucks and tractors. I broke four speed records in 1956. Today, I'm still based in France; about 15% of me is owned by the French government and another 15% by Nissan Motor, with the rest mostly owned by employees and the public. I sell more than 2 million vehicles annually. Who am I?
Last Week's Trivia Answer
I trace my roots back to the 1899 founding of the S‹o Paolo Tramway, Light and Power Company in Brazil. By 1940, I was supplying two-thirds of Brazil's electricity. By the 1960s, I was buying physical assets (real estate, natural resources and infrastructure). Today, with a recent market value just under $100 billion, I'm a major international investment company specializing in asset management, wealth solutions and a range of operating businesses spanning energy, infrastructure, private equity and real estate. I've delivered annualized returns of more than 15% to shareholders for over 30 years. Who am I? (Answer: Brookfield Corporation)
The Motley Fool Take
E-Commerce and Digital Payment Giant
MercadoLibre (Nasdaq: MELI) is an e-commerce giant in the fast-growing Latin American market that helps people acquire goods and pay for them, too. It recently operated in 18 countries and boasted 83 million monthly active users. Over the past 12 months, its shares were down 36%. Despite some challenges, though, there are good reasons to consider buying and holding MercadoLibre.
For starters, it's growing briskly. In the first quarter, MercadoLibre's revenue grew by 49% year over year to $8.8 billion. That's impressive, but its profit margins and profits declined meaningfully. Why? Well, it has been facing stiff competition and has chosen to sacrifice short-term margins and profits to extend initiatives that may pay off handsomely. For example, it lowered the threshold for free shipping in Brazil, which is resulting in greater sales volume. That may help MercadoLibre scale up its higher-profit-margin advertising business.
MercadoLibre is also home to a major "fintech" (financial technology) company, Mercado Pago, which is pursuing growth opportunities such as expanded credit card offerings. Many of the people in the markets it serves are underbanked, providing another major growth opportunity.
Shares of MercadoLibre appear fairly valued or undervalued at current levels and could deliver strong long-term returns to investors who buy today. (The Motley Fool owns shares of and recommends MercadoLibre.)
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