Hi Victor/Rusmin, I was looking at FB and BABA’s valuation using PE and P/OCF ratio and realised there is a FY where their PE and P/OCF ratios spiked up and it came down after that.
Is using PE and P/OCF ratios the right approach for such companies with inconsistent ratios? Thanks in advance for answering my question :)
PE ratio will be fine for both companies. There shouldn’t be a large spiked up for both companies. You may want to attach your chart here. I will take a look at it and see where is the issue.
Note: BABA’s financial numbers are in CNY, and their stock trade are in USD or HKD. You need to convert the figure.
Hi Victor, yup I have extracted BABA’s financials in USD. The PE calculation for BABA was done for their NYSE listing. For both BABA and FB charts, there are suddenly spike ups or drops in the charts. Thanks for checking the charts for me!
For BABA, the chart does not look like a spike. I think the chart is fine.
As for FB, there is a sudden dropped in the PE during 2016-2017. Hence, may need to investigate further. You may want to send me the chart in excel to look at it.
I think a quick search on what happened to FB during 2016-2017 and it might be due to the cambridge analytical scandal. Given such an event, should we exclude it as anomalies in our PE calculation?
Side note – i can’t seem to attach the excel here. Can I have your email pls? Thanks Victor!
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