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

A listener learns why certain stocks have high P/E ratios.
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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) 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.

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At the time of publication, Cramer had no position in any stocks mentioned.

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