# What is meant by "price" and "earnings" here?

Disclaimer: I'm a finance newbie.

In the context of this checklist, I want to know what the author means "price" and "earnings". I'll try to explain how I need such basic terms explained.

I read The Checklist Manifesto a couple years ago, and I became a believer in using checklists. After seeing some people talk about stocks on Discord, I figured I'd get into investing, but I'd use a checklist for it. After some weeks of searching I found what appears to be a great one.

The first thing says Price/Earnings:

Price / Earnings < 15.0

I think "okay let's do this". I take a stock I'd heard about on Twitter, Atomera, and I try to calculate it... but it becomes immediately clear I don't know what "price" nor what "earnings" are.

In my mind, "price" means share price. Atomera's share price is \$22.69. When I think of earnings, I think this:

First, -\$13.5M is negative. This means Price/Earnings will be negative, so it will be < 15.0, which is apparently "good" (is it a good sign that there's a lot of market value despite the company losing money?). Even if it were positive, \$23/-\$13.5M is ~0. I think "price" and/or "earnings" has to mean something else.

I think "price" maybe mean "shares x share price", i.e. the "market cap". Given Atomera, we have ~\$0.5B/-\$13.5M for a ratio of ~-37.

~-37 makes more sense than a constant ~0, but the checklist says that < 15.0 is good. A negative earnings will always be way less than 15.0. If this metric were to be optimized, you'd want to lose as much money as possible, and that doesn't make sense to me.

So my guesses for "price" and "earnings" for the Price/Earnings metric are:

• The checklist is misguided, this metric shouldn't be used
• Price does not mean share price nor market cap, but something different
• Earnings refers to something different than what I pointed to
• A "-" in the earnings is a good thing? (No way?)
• This metric only works when the earnings are positive (the best explanation I can think of)
• I should use the absolute value of the earnings

So what is it that "price" or "earnings" refers to? Or am I missing some other fundamental?