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How about the "E" in non dividend stocks? How does owning 1% of Amazon entitle me to 1% of their earnings?
by AznHisoka 9y ago
How about the "E" in non dividend stocks? How does owning 1% of Amazon entitle me to 1% of their earnings?
- 0bsidian 9y agoIt's a good question. The consensus is that P/E is not a good valuation metric for high growth companies. I would rather use comparable multiples, DCF or sum of the parts for this type of exercise. The principle being that you will benefit from stock appreciation rather than dividend payout. e.g.: https://www.investors.com/how-to-invest/investors-corner/ignore-pe-ratios-in-stock-investing/ https://www.investors.com/how-to-invest/investors-corner/ign... https://seekingalpha.com/article/4035706-p-e-ratio-good-metric-use-growth-stocks https://seekingalpha.com/article/4035706-p-e-ratio-good-metr...
- andy_ppp 9y agoI thought because E is reinvested in a high growth company (Amazon in this case) your potential E is actually multiplied by that reinvestment.
- alex_young 9y ago'E' here is really hypothetical future earnings. Some investors think that Amazon can raise prices and become profitable after creating the walled garden. Right now they only make money renting time on servers.