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Duvell Boo asked 2 years ago

hi Coach,
1. any correlation between these two ratio?
2. if a particular stock P/E already reached 100, still can consider to buy?

1 Answers
Victor Chng answered 2 years ago

Hi Duvell,
1.Yes there are correlation with those two figure. If the EPS is growing very fast then the PE will trade at higher multiple. In general, if the EPS is growing at 30% then the PE will probably trade at 30x or higher.
2.It depend on the growth of the company, if you are sure that the company is able to grow that 100% for the following year then it is a great buy. PE 100x means that the investor is expecting the company to grow at 100%.