Linguistic trading question

I don't know if this is the best forum to post this question, but I didn't find any other more suitable

I would like to know the meaning of "trade at six times earnings" in this sentence. Can anybody help me?

If you have a mature firm with a long history, you can compare the multiple it ***trades*** today to the multiple it used to ***trade*** in the past. Thus, the company may be viewed as cheap because it ***trades at six times earnings***, if it has historically ***traded at ten times earnings.***

Thanks!

If stock XYZ earns $10 million a year and stock was at 6x earnings it means market capitalization of company XYZ is $60 million, i.e. it could have 10,000,000 at $6/share.

Hope this helps, Also if there is anymore terms you'd like to know check out CNBC explains (just google it, it'll come up)

Jeremy.

you can study up on stock investing here

http://www.investopedia.com/

and specifically the Price to Earnings Ratio here -

http://www.investopedia.com/video/pl...#axzz1YVvRcAv0

The price to earnings ratio is one of the most important ratios in investing. Find out how it is calculated, how it can be used and what it tells investors about a particular stock.

http://www.investopedia.com/universi...#axzz1YVvRcAv0

Seems to work for fellow named Buffett

Thanks a lot!