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That's not the correct way to analyze P/E. Looking at that number in a vacuum is nigh on meaningless. P/E is best analyzed as a relative measure within a give
by maerek 14y ago
That's not the correct way to analyze P/E. Looking at that number in a vacuum is nigh on meaningless. P/E is best analyzed as a relative measure within a given market (in this case, online retailers w/ no brick and mortar presence).
That said, there are exceptions to every rule. I'm not aware of any other companies that currently exhibit such a high P/E.
- marvin 14y agoWhat am I getting wrong, exactly? If a company is going to be a good long-term investment based on fundamentals, it needs to have a sensible P/E ratio. There are exceptions for companies that are growing or have a high probability of having higher earnings in the future. And of course a stock can make very big price movements with no change in fundamentals. But in a long perspective, there needs to be a small ratio between what you paid for the stock and what the company earns if it is going to be a good investment. FYI I am heavily invested in Tesla Motors, which currently has an undefined/negative P/E ratio.
- maerek 14y agoI don't disagree on seeking a sensible P/E ratio. I'm stating that in order to determine what qualifies as a sensible P/E ratio, you need to look at the industry/market the company operates in.
- _k 14y agoAmazon is a category killer just like Wal-Mart is and if their PE ratio is 14.38, then Amazon's P/E ratio should be in that area as well. In order to avoid being placed in that category, you have to do some disruptive things. It's similar to what most web based companies do, they try to shoot for the stars and keep that momentum going. I think that explains the high P/E.