RealMoney Radio Mailbag: Solving the Mystery of High P/Es

Editor's note: The following are questions received from listeners of "RealMoney Radio." To send Cramer a question about topics from his radio show, click here. Listen to Cramer's latest radio show by clicking here.

---

Why do the video-game software stocks like Electronic Arts (ERTS Quote) have such high P/E ratios?

-- Barry

Jim Cramer: These companies have high P/Es because their earnings are extremely lumpy and tend to come at the end of the cycle, while we are at the beginning of a cycle here. So, companies like Electronic Arts won't earn much this year, but in two or three years they will earn a great amount of money, and investors tend to look at where earnings will peak when valuing the stocks.

---

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.