Key insights
- The post discusses the challenge of valuing growth stocks with high P/E ratios, even after significant pullbacks. It questions whether a 'historical low' P/E for these stocks justifies their valuation compared to mega-caps. The author is struggling to reconcile high P/E ratios with value investing principles, suggesting a cautious outlook on these specific growth stocks.
I’ve been tracking companies like HOOD, NOW, SE, MELI, RDDT, FICO..etc that have recently pulled back 25-40+% from their ATH. Despite the price drop, they are still trading around on average of 35+ pe ratio. From a value investing perspective, this still looks expensive especially if compared to mega-caps like meta, msft, amzn and goog which ofter trade in their mid-20s.
However, the common bull case for these stocks is that their pe is at its lowest since inception and i am kind of struggling with the justification here. How do i value these companies when their “historical low” is still trading at a significant premium over the broader market?