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Yeah but why should anyone care about earnings in this exact year? P/E might be useful for your thought experiment about the genie but it's completely useless a
by bluecalm 3y ago
Yeah but why should anyone care about earnings in this exact year? P/E might be useful for your thought experiment about the genie but it's completely useless as a tool to value companies.
- oezi 3y agoWhat? You as the shareholder own the earnings and their use. Earnings thus either become dividends or become re-invested or are used to buy back shares. P/E is the central metric by which to judge stocks on a fundamental level.
- bluecalm 3y agoWhat I am saying is that P/E is based on current year earnings. It can be quite low but the company is terrible (Intel) or quit big but the company is great but chose not to cash out yet (Amazon from a few years ago). You should care about how much the company is likely to make in coming decades. How much they have made in a current year is a useless metric for that. Profits are not the only thing either. Some assets give political power or power to shape the world. If NVidia made 0 it would still be very valuable because of that.
- Invictus0 3y agoThere is something called forward PE which takes into account the company's estimated growth.
- blackoil 3y agoPE is only one number, you also look into growth as a factor to calculate PEG. So question now is for how long NVidia can grow at this crazy rate.