Mad Money w/ Jim Cramer 9/2/26

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**Jim Cramer** (1:01)
My mission is simple, to make you money.
I'm here to level the playing field for all investors. There's always a boom working somewhere, and I promise to help you find it. Mad Money starts now.

**Jim Cramer** (1:18)
Hey, I'm Cramer.

**Jim Cramer** (1:19)
Welcome to Mad Money. Welcome to Cramer. I got other people and friends. I'm just trying to make a little bit of money. My job is not just to entertain, but to educate you. So call me at 1-800-743-CMBC, or tweet me at Jim Cramer.
Sometimes things get too expensive, so we buy something else. That's how we've been all towards the shop, right? For just about everything. And the stock market is no exception. When you don't have a lot of money coming into the market, and there is real competition, that's that 30-year treasury is now paying you 5.26% virtually risk-free. You want to steer clear of pricey stocks, and you want to pile into the cheap ones. It's hard to discern this kind of rotation when you look at the averages. With the Dow gaining 295 points today, it has to be rising 0.46%, Nasdaq advancing 0.45%, but you can see it when you look underneath. You just need to know how to look. I think that lots of people who aren't that familiar with the stock market might not know how to judge what's cheap versus what's expensive. That's why I wrote the book, How To Make Money In Any Market, which you can get a signed copy of by the way, if you join the CBC Investing Club now. Unfortunately, many people are like my late mom, who looked at stock prices, I guess you call it in a vacuum. As mom saw it, disk drive maker Sandisk with a price of $1,553 would be considered far more expensive than enterprise software company MongoDB at $375.
NVIDIA, priced at $224, might seem pricier to her than, say, ServiceNow at $136.
But unlike when you're shopping at the supermarket or a car dealership, the sticker price means very little in the stock market.
We always want to compare stocks on an apples to apples basis, and there's nothing apples to apples about the share price. All these companies have different numbers of shares, they have different earnings per share, so where the stock's trading, it's a pure abstraction, something that really doesn't tell you much at all.
Now, if you want to truly compare them, be able to figure out what's expensive, what's not, you need to figure out what the companies are supposed to earn for the next 12 months, readily available at almost any stock site, then you divide the stock price by the earnings, and you get something called the price to earnings multiple. Comparing PE multiples is the apples to apples way to value one stock versus another. Or maybe you want to think about it algebraically. You want to figure out the M. You divide the stock price P by the earnings estimate E, or P divided by E equals M. When you're valuing a stock, you're solving for M, and M is the secret sauce behind everything in this business. Let's look at it in action, you'll understand. SanDisk is supposed to earn $212 a share. You divide the price of the stock by that estimate, and you get a price earnings multiple. Comes out about 7.3. Considering the average stock of the S&P sells 21 times earnings, that's a steal.
Enterprise software company MongoDB, on the other hand, is supposed to earn just under $6.50. You divide that in the stock price, and you get an M of nearly 58 Hmm, SanDisk trading at 7.5 times earnings, that's a heck of a lot cheaper than MongoDB, trading at almost 58 times earnings. No wonder the ladder plunged 13.5% today after a decent quarter. It's too rich in this market, and too rich equals sell.