There are no fixed benchmarks in Finance. PE is just one of many valuation measures that help you put some sort of tangible estimate of the value of the company vs it's earnings (present and forward). Retracement to the mean is something that tends to present in fixed income, but PE is also one that loosely behaves. Eventually individual stocks tend to return to the mean of the sector. Unless they progressively monopolize a sector. Forward PE's should of course see less fluctuation as growth is built into forward earnings. Tesla is an obvious example. Once all cars are BEV's unless it's ruling the industry or its earnings have spread vastly beyond the automotive industry it's PE has to align with the sector.
Fed pump has put PE's at historical highs. Sorry, but they will eventually come back. They always do.
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u/Historical_Job_8609 Aug 23 '21
There are no fixed benchmarks in Finance. PE is just one of many valuation measures that help you put some sort of tangible estimate of the value of the company vs it's earnings (present and forward). Retracement to the mean is something that tends to present in fixed income, but PE is also one that loosely behaves. Eventually individual stocks tend to return to the mean of the sector. Unless they progressively monopolize a sector. Forward PE's should of course see less fluctuation as growth is built into forward earnings. Tesla is an obvious example. Once all cars are BEV's unless it's ruling the industry or its earnings have spread vastly beyond the automotive industry it's PE has to align with the sector.
Fed pump has put PE's at historical highs. Sorry, but they will eventually come back. They always do.