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Comment by nextstep | Hacker News Reader

This whole argument is asinine. You need to consider that each company is floating a different number of total shares. Buying one share in FB and one share in Google would not grant you an equivalent stake in each company. You need to see how many outstanding shares each company has on the market (and what fraction of the company is public).

For your purposes (comparing valuations between two companies), it would make more sense to compare market caps.

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P/E ratio does already correct for number of shares: it's a ratio of your share's price to your share of the company's earnings, based on the percentage of the company your share represents. Alternately, if you take totals, it's market cap divided by earnings.

Total Valuation / Total Earnings. Increasing the shares will not change the math...

Think about it in your head with an imaginary company with 1, 2 or 4 shares.

I've always been baffled by stock splits (and those calling for them) for this very reason. I suppose it makes sense for BRK.A's $120k shares, but for AAPL?

Stock splits are an interesting discussion. Other than psychological differences, a split really only increase liquidity and encourage more small investors but it also encourages more short term speculation. Berkshire is happy to continue to cater to the highest class of long term investors with the added benefit of being noted as the highest priced stock in the NYSE. Although, they did recently do a large split of their class B stock to allow more trading and to be included in the S&P 500.

Google is doing a stock split to create new nonvoting shares.

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