This is a good read! I personally struggle to buy stocks with such a high P/E, but I as the years pass, I realise that a p/e of 20 is cheap for a fast growing company, and 30 can be ok.
I struggle to buy more than 20x, but an exception was ARM just after the IPO. I struggle to buy, but I think twice before I sell even when p/e goes to 30 or 40.
It is a good problem to have as it is a filter for not overpaying. I look at P/E, Price to Sales and Price to Cash Flow as well. In many cases however, as price is the numerator in all of them, they will show a similar picture. I will allow more of leeway on P/E is if sales growth is high and quality is high, Quality is proxied by high ROE (but leverage must be limited or non-existent).
This is a good read! I personally struggle to buy stocks with such a high P/E, but I as the years pass, I realise that a p/e of 20 is cheap for a fast growing company, and 30 can be ok.
I struggle to buy more than 20x, but an exception was ARM just after the IPO. I struggle to buy, but I think twice before I sell even when p/e goes to 30 or 40.
It is a good problem to have as it is a filter for not overpaying. I look at P/E, Price to Sales and Price to Cash Flow as well. In many cases however, as price is the numerator in all of them, they will show a similar picture. I will allow more of leeway on P/E is if sales growth is high and quality is high, Quality is proxied by high ROE (but leverage must be limited or non-existent).