There are a lot of ways to evaluate a stock's current price ...

There are a lot of ways to evaluate a stock's current price and whether or not it presents a good value. Here are a few:

Price-to-earnings ratio: The PE ratio takes a company's share price and divides it by its earnings per share over the past year. Investors can find stocks trading for a good price when their PE ratio falls below its historic average. This metric is best used by well-established companies producing steady profits and growth.

But there may be a good reason for a stock to trade at a higher PE ratio than it has before. If earnings growth is expected to accelerate over the next few years, investors should be willing to pay more per dollar of profits. Remember, stock prices are determined by future expectations. The past can only be used as a rough guide.

Price-to-sales ratio: The PS ratio is more useful for growth stocks that aren't profitable or produce very unstable earnings. Again, historical averages can be a good guide, but be sure to factor in future expectations.

Importantly, not all sales are created equal. A company may come out with a new product or service that produces a much different profit margin than its core business but accounts for the majority of its revenue growth. As a result, investors need to adjust their expectations for how the stock should price relative to future sales.