Imperfections In The Formula
The flaw in the oversimplified equation is that it suggests that the letters (C and r) are known with certainty.
Take a look at the differences in earnings estimates (the C’s) for a specific company, compared to actual results. Again, picking individual companies (like Jae’s Rib Shack, or TSLA) is not easy, the individual investor has only a fraction of the story. However, the huge markets cannot be easily manipulated, and can be observed.
Estimates of the denominator are also subject to error, it is simply that the extent of the error (and disagreement) regarding the denominator has declined.