MI233: Understanding Stock Prices vs Company Value w/ Brian Feroldi
The Intrinsic Value Podcast - The Investor’s Podcast Network
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How to Tell if a Company Is Cheap or Expensive?
A high PE doesn't mean a company is automatically overvalued, it just means that the market has a high expectation for that stock. A number of reasons why the E, the earnings that a company have can be dramatically overstated or understated. Shopify recently took a pretty big equity position in a financial company called Affirm. When Affirm's stock goes up, Shopify says our net income went up and the inverse is also true. For that reason, Shopify's PE ratio is essentially useless to investors because it tells you nothing about the underlying business.
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