A company that has strong financials and even high prospects does not automatically have an attractive stock. Indeed, a good company and a good company's stock are two different things and overpaying for a stock does not constitute a wise investment. On the other side, many (if not most) companies that appear to be undervalued when one is looking at valuation ratio like price to earnings will turn out to be bad investments. The key is not to rely entirely on financial statements and financial ratios but instead develop a deep understanding of a company's business in order to find strong undervalued stocks.