There isn't a calculation nearly this simple and accurate for deciding when to buy stocks. But there are ways to value stocks that are favored by people who do stock analysis for a living. Two of the simplest are the price-to-earnings (P/E) ratio and the price-to-revenues (P/R) ratio. The P/E ratio compares the price of a company's stock with that company's profits (or earnings). The P/R ratio compares the price of a company's stock with that company's revenues. The logic behind both is the same: If the company's current ratio is higher than its historical average, it is deemed expensive. If it's lower than its average, it's deemed to be selling at a discount. Take Coca-Cola (NYSE: KO), for example. Its current P/E ratio is 27. This is four points higher than its P/E for the last five years (23), and it is also four points higher than the P/E ratio of a similar company, Mondelēz International (Nasdaq: MDLZ) (23). A great time to buy Coke was (I'm not bragging) when I bought it in 2015. Back then, it had a P/E ratio of only 20, which was, as you can see, relatively cheap. Dan Ferris, editor of Extreme Value and a colleague of mine, did a study on Coke's fluctuating values about a dozen years ago. I don't remember the details, but I remember his conclusion: Even with a world-dominating brand like Coke, it does make a difference when you buy it. You should look to buy at or below its long-term value, whatever valuation method you use. I rely primarily on the P/E ratio to value the "priciness" of a stock because of its simplicity and relative reliability. But I always ask Dominick, my broker, to take a deeper dive into evaluations when he thinks it's merited. Like using the gross rent multiplier method for valuing rental real estate, using the P/E ratio for stocks can make it difficult or even impossible to buy more stock in good companies for years and years. When the market is generally overpriced, P/E ratios are generally overpriced. And this is especially so when your portfolio consists of large, market-dominating companies. There are times when you have to wait months or even years before the price of one of these great stocks comes into a safe buying range. During these times, the cash portion of your stock account will get larger. You may be tempted to buy stock even if the P/E ratio is high - especially if there are reasons to believe that the stock market or one of your stocks is going to move up. When this happens, I sometimes ask Dominick if he can find any similarly large and dominating company that I don't own and whose stock is NOT overvalued from a P/E perspective. If he can, we talk about whether it makes sense to expand the portfolio to include this extra stock. There have been a few times when I've invested the cash in my stock account on some other type of investment - real estate, private equity or private debt. But generally, I'm comfortable sitting with cash since, because of how I diversify my portfolio, that cash is never more than 5% or 6% of my net investable wealth. I'm not suggesting that this way of valuing stocks makes sense for everyone or even anyone reading this essay. I'm answering a good question by explaining what I do and have been doing for many years. So far, it's been working well for me. Good investing, Mark | 
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