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TIP476: How to Value Companies like Alphabet, AXON and FIGS w/ Brian Feroldi
We Study Billionaires - The Investor’s Podcast Network
The PE Ratio of the Dow Components in 1995
In 1995, Home Depot was trading at 36 times earnings. In no world would you call that PE ratio cheap. And yet it smashed the market's return. So much so that investor could have been willing to pay 77 times earnings for Home Depot in 1995. They would still be able to earn a market matching return. Conversely, Alcoa was trading at 10 times earnings and yet to earn an 8% return in 1995 on Alcoa, you would have had to bought the company at three times earnings. The table just really hammers home the point about how valuation is really, really important in the short term but what truly matters in the long term is did you buy a great company
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