One of the biggest benefits of using a P/E multiplier on fundamentals is that we can easily compare the market cap (or stock price) to the fundamentals. If the market cap exceeds the fundamentals (the red arrow below), then it’s P/E expansion. It can be justified if the company has a new business model that gives them greater growth of profit margins, but often times it’s an indicator that the stock is overvalued.
New Feature: P/E Dislocation
New Feature: P/E Dislocation
New Feature: P/E Dislocation
One of the biggest benefits of using a P/E multiplier on fundamentals is that we can easily compare the market cap (or stock price) to the fundamentals. If the market cap exceeds the fundamentals (the red arrow below), then it’s P/E expansion. It can be justified if the company has a new business model that gives them greater growth of profit margins, but often times it’s an indicator that the stock is overvalued.