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Yes, they're not valued on making $10 billion per year. That P/E means it would take 24 years to make your money back. They're valued so highly because they're
by mminer237 5y ago
Yes, they're not valued on making $10 billion per year. That P/E means it would take 24 years to make your money back. They're valued so highly because they're growing and it's expected that in ten years, it'll $30 billion per year, cutting your return time. If growth ends, then this overvaluation corrects itself.
- jbay808 5y ago24 years to earn your money back works out to a 2.9% annual rate of return, which is a little bit above both the 20 and 30 year treasury yields (~2.23%), reflecting a small but positive risk premium for a big blue-chip company that is generally seen as a low-risk investment. This looks like another example of how low interest rates cause stock valuations to run up until their long-term yields end up only slightly higher than bond yields. Investors expecting that rapid growth to continue might be disappointed.
- Apocryphon 5y agoZero-Interest rate policy explains the world https://www.readmargins.com/p/zirp-explains-the-world https://www.readmargins.com/p/zirp-explains-the-world