One of the most important lessons investors need to understand is that the price you pay for a stock compared to that companies earnings and book value is the most important factor investors can control affecting future income and returns. In other words, the valuation you pay for a company is very important.
The Two Brothers Who Love Coke
To make this point more clear I want to work through an example of two brothers who drink lots of Coca-Cola. These two brothers names are Larry and Oliver.