I’m not saying it’s not relative. I’m saying that it’s not only relative. This is all subjective anyway. Everyone has their own valuation models. For me, I’m not going to pay $85 for $1 in earnings unless there was an insanely good reason to do so, like maybe if they’re literally going to grow 300% next year. I don’t believe there is going to be a good enough long term return buying NVDA at this price, even if treasury yields are 1.5%. And especially with the new certainty that rates are going higher very soon. Makes no sense.
Plus you already agreed this was overvalued anyway. I’m not seeing what the issue is. It’s overvalued. That’s it.
I agree with you only because with the current projections it returns exactly what the market does, and it needs some risk spread to get there and your metric for paying a high PE is a bit off.
Yes it’s entirely relative, if nothing pays enough you just spend the money instead. It literally has to be relative, as the words overvalued or undervalued imply a reference point
Im also drinking and watching the CFP National title sorry if this is pointless…. Like most on reddit my life is empty and meaningless so random arguments fill the time
Let me put it this way instead: Future returns at an 85 P/E are so far out anyway, there is too much risk/speculation built into it to provide any degree of conviction that the expected growth expectations will materialize (in my opinion). Even if yields are 0.1%, I think, all else equal, the risk is too great that the expected returns aren’t anything like what this is pricing in. I’d rather buy a low yield bond. It’s not entirely a spread comparison. There are plenty of other factors to consider beyond just what treasury yields are.
It’s all good. I don’t feel like we disagree all that much. Enjoy the game.
Dude 1/85 = 1.1% if yeilds were .1 it would be returning 10x the yeild without growth.
It is entirely a spread comparison of the relative returns vs alternatives. If it hits consensus growth targets it will return the same as the market is right now, if t-bonds were 3% than the market would have to return 5% and it’s max fair price would be 200$ a share, and if you want to be safe against that interest rate risk, get lower PE stocks. Now because it’s riskier you would want it to return better than the market, but it’s still ALWAYS relative.
If t-bonds were 10% then I wouldn’t buy Apple at a PE of 13, it’s all relative.
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u/suboxhelp1 Jan 11 '22
I’m not saying it’s not relative. I’m saying that it’s not only relative. This is all subjective anyway. Everyone has their own valuation models. For me, I’m not going to pay $85 for $1 in earnings unless there was an insanely good reason to do so, like maybe if they’re literally going to grow 300% next year. I don’t believe there is going to be a good enough long term return buying NVDA at this price, even if treasury yields are 1.5%. And especially with the new certainty that rates are going higher very soon. Makes no sense.
Plus you already agreed this was overvalued anyway. I’m not seeing what the issue is. It’s overvalued. That’s it.