3 ms·
You first have to define "overpriced".
by robjan 6y ago
You first have to define "overpriced".
- skohan 6y agoThe textbook answer would be when the p/e ratio is over 25 no? Tesla is at 1,151.43.
- humanlion87 6y agoThat seems to be a value that would be valid for a different era. I am not sure whether we can go by those same numbers for the current market environment (especially after the QE starting from 2008/09).
- skohan 6y agoWould you agree that over 1k seems a bit high?
- MacsHeadroom 6y agoI'm not actually sure it is. 1000 is two orders of magnitude. One for the 2008/9 interventions and shift and one for the current. 1000 could even be low.
- skohan 6y agoI think QE maybe explains some of the decoupling of market cap from real-world value, but I'm not sure it justifies it.
- dannyw 6y agoP/E is still relevant, but you also got to consider future growth. Would you rather buy a 20 P/E company that is growing by 1% a year; or would you rather buy a 200 P/E company that is growing by 30% a year?
- loxs 6y agoI absolutely search and buy the former... there is only so much growth Tesla can realistically sustain... and currently it's "not any more". Same for all of the Big Tech. Give me Rio Tinto and I buy it any day.
- alltakendamned 6y agoFuture growth will already be mostly priced in if you buy it at 200 P/E
- robjan 6y agoNo, not really. A high PE ratio just means investors are expecting the company to grow. I probably wouldn't buy TSLA, but 25 isn't some magic number which means the stock is overpriced otherwise people who "know what they are doing" would short anything with a PE ratio higher than 25.
- BMSmnqXAE4yfe1 6y agoThe textbook answer would be to divide PE by current treasury yield. Which is close to zero, so the textbook share price should be close to infinity.
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