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Because everything is crazy expensive currently. We‘re in a bubble. Look at the valuation of WD-40, Bitcoin or Shopify for example. WD-40 had a 500k annual reve
by huijzer 5y ago
Because everything is crazy expensive currently. We‘re in a bubble. Look at the valuation of WD-40, Bitcoin or Shopify for example. WD-40 had a 500k annual revenue and is valued at 2.6 billion. Their free cash flow is only about 100k, so they would need 26 years to buy all stocks back at the current valuation assuming no growth in earnings.
As another example look at the current PE ratio of the companies in the S&P 500: https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea.... This shows that prices are unusually high compared to earnings.
- rohitb91 5y agoYou mean 26,000 years
- jorams 5y agoYou're off by a few orders of magnitude for WD-40 (WDFC). They had 488 million in revenue for 2021.
- huijzer 5y agoThanks for pointing that out. I meant 500 million annual revenue and 100 million annual cash flow. The 26 years back-of-the-envelope calculation was correct though: 2.6 billion / 100 million = 26 years.