Some stuff I bought last week

[adios]

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Studies? For what?

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To indicate that picking company A referred to below has inferior returns for investors compared to company B below.

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Companies A and B have PE's of 20 and the same market cap. Company A has twice as much debt as company B. Do you think these these firms are fairly valued (assuming all else is equal)? I don't know of any study that proves this, or even where I'd look to find one, but it's basically just common sense.

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Just because you say it's common sense doesn't mean that buying stock in company A will provide inferior investment returns than buying company B stock. Again this is a fairly easy set of criteria to enumerate and track investment returns for. What I'm chiding you about is that IMO you're more or less arguing that there's a market ineffeciency of some sort.

Here's what you wrote in the post I responded to:

If anyone's wondering why I call P/E a "completely flawed metric", you should go compare a bunch of companies in similar businesses with varying debt levels. You will almost always "determine" that the higher levered companies are the most undervalued. P/E uses a firm value and compares it to an equity cash flow; that makes companies with excess debt appear deceptively "cheap".

If a company is deceptively "cheap" then this implies to me that it's a worse investment i.e. will have inferior returns for the investor buying the stock than another compnay with a similar business but less debt. I'm a little confused with your point here because in the post I responeded to I think you implied that the companies in similar businesses have different PE's as the higher leveraged company has a lower PE and thus is "deceptively cheap." But in your next response they have the same PE's so why would the higher levered company be "deceptively cheap" if they have the same PE's? Put another way when you wrote:

You will almost always "determine" that the higher levered companies are the most undervalued.

I assumed you meant the higher levered companies would have lower PEs. Is that wrong and if so could you elaborate on the criteria that you were referring to that one would use to "determine" that the higher levered company is undervalued?