How much growth for 1x P/E?
Just wondering whether anyone has a good reading material on how much growth people want for different P/E levels. For example, I want at least 25% growth for 15x.
I understand this will vary based on the market conditions, risks involved, and many more stuff, but I am pretty sure there is a big picture to it as well. This is just for the background knowledge.
Thanks!
This kind of what you're looking for? I imagine it depends on an individual basis since your essentially asking what a $1 in future earnings can do to the stock price today. I don't think you can equate the future p/e to expected returns, at least real accurately.
http://en.wikipedia.org/wiki/File:Price-Earnings_Ratios_as_a_Predictor_…
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http://en.m.wikipedia.org/wiki/Benjamin_Graham_formula
8.5 is a standard pe for a no growth firm then u add 2 times the rate of growth over the next 7 - 10 yrs.
This just gives u a formulaic guesstimate, but it's nice to have a frame if reference
Depends on industry as well as all sorts of cycles, and P/E isn't only based on future growth. Unanswerable question.
What are the main factors for a pe multiple? Classrooms basically imply that value goes up when risk goes down or fcf goes up.
Could you please elaborate? In my head relative future growth adjusted for the probabilities is the major factor. I just can't think of what else is out there?
I am doing a specialty pharma right now and I am doubting the usefulness of the comp table. So I kinda want a general long-term (think last 30 years) idea of what growth people require for different P/E levels.
In my case it looks like I have to pay 20x P/2013 EPS for the 25% growth (20013-2014). I am asking myself is this a good deal or not.
I think this article does a pretty good job of explaining theoretically the factors that influence multiples:
http://www.wallstreetoasis.com/blog/my-ebitda-multiple-is-bigger-than-y…
Of course, there's all sorts of things that influence those factors...industry is one example.
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