Depends on discount rates. The value of a company is the net present value (NPV) of its discounted cash flow (DCF). P/E is just a kludge to simplify the much mo

Depends on discount rates. The value of a company is the net present value (NPV) of its discounted cash flow (DCF). P/E is just a kludge to simplify the much more complex DCF analysis. And it's pretty clear that interest rates have been steadily falling for 40 years[1]. Arguably 500 years[2]. Is there temporary variation around the business cycle? Sure. But in the long-term it's extremely unlikely we return to the There's strong macro evidence that interest rates are heavily influenced by demographics[3]. And despite what happens this recession, the population isn't going to stop aging. All of this to say that historical appeals to "normal" P/E ratios is extremely misguiding. We're probably never going back to a world where single digit P/E ratios are the long-term norm, because we're probably never going back to a world with 5% real interest rates are the norm. [1]https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y [2]https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... [3]https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-demographic-trends-and-the-real-interest-rate.pdf https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-...