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It's not an either-or. ideally it's the IV of each individual stock compared to its current stock price. Having said that, computing IV is easier said than done.

My rough methodology is -
- Don't predict the future, don't assume earnings growth will continue, don't assume market sentiment will continue.
- Balance sheet is all-important for financials, important for resource companies (many energy and materials), relevant only to check red flags like excess leverage, excess goodwill etc for most other companies.
- Cash flow statement is mostly important to make sure income statement is not hiding something. e.g. net income should be comparable with CFO - CapEx (averaged over a few years.)
- Income statement tells you most of the story, except for direct-to-book "earnings" (not sure what the accounting term is for those.) Mostly the latter are relevant for financial companies who book gains and losses on long-term investments.

Bottom line, I still use the same method. But in the last year, less and less companies look cheap by any measure. Some in fact look fully valued. e.g. I sold PG at 25x P/E and no growth, though it is undoubtedly a solid company that can pay you a 3% dividend forever. But when everything has risen so much, opportunities due to volatile sentiments cannot be far behind.
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