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The reason why forward guidance matters is because of valuations. Google PE is over 20 as of close of day. Entire S&P 500 PE is 15 and even that is traditionall
by baskethead 4y ago
The reason why forward guidance matters is because of valuations. Google PE is over 20 as of close of day. Entire S&P 500 PE is 15 and even that is traditionally high. If Google's PE reverts to the S&P500, you're talking a 20% cut just from here. Forward guidance and consistent growth is what mutual funds will pay a premium for. Lots of companies have a ton of room to drop if PE ratios drop.
- HFguy 4y agoFWIW, sp500 forward pe more like 18
- riku_iki 4y ago> Entire S&P 500 PE is 15 Google demonstrates steady 25% y/y grows for 20 years already, most of SP500 probably doesn't.
- colinmhayes 4y agoWhich is why guidance matters... Most companies are just expected to grow barely faster than inflation, which isn't too hard. But companies with high PE are expected to grow much faster. It's not this quarters revenue that matters, but future ones. Guidance is about future quarters. Sour guidance means you're no longer a rocketing tech company.