Post by chiangmai on Sept 12, 2021 4:48:40 GMT 7
An interesting article this morning talks about the P/E ratio of FANGS over the years. Whilst the initial P/E ratios scared everyone to death, a few years on they became reality. The writer refers to the phenomena as retrospective P/E.
"Patience is being rewarded like at no other time. Thanks to a climb in profits that is as steady as it is steep, valuations that once made noses bleed turn out to be very reasonable when measured against income one or two years later. Call it retrospective P/E -- price divided by earnings that eventually come to pass.
Take Facebook Inc. in 2013, for instance. The stock looked gravely expensive one year after its debut, fetching a price-earnings ratio of 62 based on the income it generated in the previous 12 months. However, when measured against the profit that the social-media company made one year later, the stock cost only half as much.
Amazon.com Inc. showed a similar story. The internet giant was traded at roughly 183 times reported earnings back then. When judged by earnings that materialized five years out, it was cheap -- for a multiple of 14.
Needless to say, that year was the onset of a 530% rally for the Faangs -- Facebook, Apple Inc., Amazon, Microsoft Corp. and Google parent Alphabet Inc., an advance that easily dwarfs every major industry in the S&P 500. Original Faang member Netflix Inc. has gained more than 1,000% since then".
www.bloomberg.com/news/articles/2021-09-11/sky-high-faang-stocks-were-never-anything-but-screaming-bargains?srnd=premium-asia
Maybe something to remember when considering the likes of Tesla.
"Patience is being rewarded like at no other time. Thanks to a climb in profits that is as steady as it is steep, valuations that once made noses bleed turn out to be very reasonable when measured against income one or two years later. Call it retrospective P/E -- price divided by earnings that eventually come to pass.
Take Facebook Inc. in 2013, for instance. The stock looked gravely expensive one year after its debut, fetching a price-earnings ratio of 62 based on the income it generated in the previous 12 months. However, when measured against the profit that the social-media company made one year later, the stock cost only half as much.
Amazon.com Inc. showed a similar story. The internet giant was traded at roughly 183 times reported earnings back then. When judged by earnings that materialized five years out, it was cheap -- for a multiple of 14.
Needless to say, that year was the onset of a 530% rally for the Faangs -- Facebook, Apple Inc., Amazon, Microsoft Corp. and Google parent Alphabet Inc., an advance that easily dwarfs every major industry in the S&P 500. Original Faang member Netflix Inc. has gained more than 1,000% since then".
www.bloomberg.com/news/articles/2021-09-11/sky-high-faang-stocks-were-never-anything-but-screaming-bargains?srnd=premium-asia
Maybe something to remember when considering the likes of Tesla.