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There's a metric for this, the PEG ratio. It's P/E divided by real growth rates. Googles PEG is about 1.5. "1" is considered ideal, less than one is a "deal",
by encoderer 13y ago
There's a metric for this, the PEG ratio. It's P/E divided by real growth rates.
Googles PEG is about 1.5. "1" is considered ideal, less than one is a "deal", over 1 is not.
But 1.5 isn't bad. Amazon, for example, is around 4, even now after the correction.
- marvin 13y agoIt doesn't really make sense to compare this number with other companies in the same sector. Long-term, the stock price needs to reflect the actual income and growth of the company. Otherwise we are in "greater fool" territory. There is good reason to be skeptical of Amazon's valuation, and that of many other tech companies. (Not that for the record, I am almost exclusively a growth investor in the speculative part of my portfolio). Google still has room to grow, though. I am actually more worried about Facebook's risk/reward profile.
- whoismua 13y agoBut I think their growth is artificial and not sustainable. It's obvious that their growth has been achieved by adding more ads to the pages even as their CPC is crashing. .
- encoderer 13y agoIt sounds like what you have is an investment thesis :) Put some money behind it! Maybe you're right..
- whoismua 13y agoPut some money behind it! Maybe you're right.. "Markets can remain irrational a lot longer than you and I can remain solvent." comes to mind ...I was right two years ago but Google continues to surprise me with their audacity and ability to suffer no penalties by users and governments. But eventually everything will be ads and someone might notice ;)