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Or perhaps P/E is not the end-all-be-all of metrics for judging value?
by crucifiction 12y ago
Or perhaps P/E is not the end-all-be-all of metrics for judging value?
- jeffreyrogers 12y agoI completely agree, however, it is still a useful metric. And when a stock has a P/E of 910 the growth rate that the underlying business must grow at in order to justify such a price is astounding.
- apostate 12y agoP/E approaches infinity as you near "break even", so for a company like AMZN with both massive revenues and expenses, P/E is not useful when the two are almost equal. You must dig further and look at things like cash flow, revenue (not earnings) growth, operating margin (not profit margin), etc. These things give a much clearer picture than an odd-looking P/E. If a company with high P/E had operating margins that ware closer to profit margins (not triple, like AMZN) I would be a bit more concerned. If capital expenditures are reduced just a bit, or if margins are improved slightly, the E part of the fraction will jump and P/E will fall massively. All of that being said, there are still plenty of things that could go wrong for AMZN.