Key insights
- The author argues that the Price/Earnings to Growth (PEG) ratio is a superior valuation metric to the Price/Earnings (P/E) ratio, especially for growth stocks. They contend that the market currently values companies based on future earnings, making PEG a more relevant indicator than P/E alone. The piece criticizes the common practice of dismissing stocks solely based on high P/E ratios without considering their growth prospects, suggesting this approach is outdated and leads to misinterpretations of company value.
I keep seeing endless posts about this stock and that stock that say “the P/E is 115x which is insane” or something along those lines and it drives me nuts. PEG is just taking the price to earnings and dividing it by the growth rate. You can do it easily on a calculator and it gives a better idea of the companies value compared to its future earnings as opposed to its previous. Wether that’s the right or the wrong way to judge a company is an argument I’m uninterested in having because the market is currently valuing companies based off future earnings and if that changes then I’ll change and you should too. Until then stop sayin things like “MU is insanely overvalued its at a P/E of (whatever it happens to be that day)” when it has a growth rate of 400% you sound dumb and it’s really starting to annoy me.