Yes, that's the general idea. Your $62 today theoretically gives you some right to $1 per year of earnings + every other year after that, taking into account e

Yes, that's the general idea. Your $62 today theoretically gives you some right to $1 per year of earnings + every other year after that, taking into account earnings growth (So, the case for high P/E ratios is that earnings growth will be fast enough that that $1 quickly turns into $2 each year) Apple's P/E, for more comparison, is at 16. But more specifically, since facebook doesn't pay a dividend, you won't see that $1 each year because Facebook will re-invest their earnings into their business. You're essentially saying that facebook will invest that $1 into growing their earnings faster than you could generate a similar return by investing in something else. When a company reaches a point where the market is mature and further investment will likely not result in a earnings growth rate that beats similar alternative investments, it pays a dividend and the stock actually becomes a cash stream, which you can then re-invest or spend freely.