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QuestionsCategory: Valuation QuadrantUS stocks valuation
Elmo asked 2 years ago

Dear Rusmin and Victor,
I am currently determining the valuation of US companies such as Apple, Facebook, Microsoft and Mastercard. Am I correct to use PE ratio? Or should i use discounted cash flow? As the value I came out for Apple using the PE ratio valuation shows that it is now about 80% overvalued. While Facebook’s PE ratio valuation shows that it is at fair value currently.

1 Answers
Victor Chng answered 2 years ago

Hi Elmo,
You can use PE ratio to value apple, Microsoft and Mastercard. You are right that Apple valuation is on the high side while for facebook because their PE chart is decreasing is rather different from Apple. Hence, FB is better to use PEG ratio to value them (Looking at the PE ratio comparing with their past earnings growth).