MONEY CHOPS. Fun with Peg and P/E. “Who’s P/E Again?”

 

“TECH LASH”

IS THE KICKY HANDLE NOW PROMINENT WHEN TALKING ABOUT BIG TECH.  CRAMER’S FANG CAME FIRST.  NOW IT’S TECH LASH.  YOU KNOW BIG TECH; AMAZON, APPLE, MICROSOFT, ALPHABET, FACEBOOK.  FACEBOOK’S TROUBLES HAVE CRASHED OVER ALL BIG TECH LIKE TSUNAMI DOOM.  THE CLAMOR’S GROWING.  PRIVACY PURPORTEDLY IS DRIVING THE “CONCERN.”  FACT.  FEW ARE CONCERNED.  LOOK AT FB’S ADU(AVERAGE DAILY USERS) AND MAU(MONTHLY ACTIVE USERS) NUMBERS.

 

EUROPE HAS NOW LAUNCHED A DATA PROTECTION MECHANISM, THE GDPR(GENERAL DATA PROTECTION REGULATION.)  THE GDPR INCLUDES CONSUMER INFO PROTECTION THAT COVERS THINGS LIKE RACE, POLITICS, WEB-BROWSING, COOKIES, AND BIOMETRICS.  THIS EU REGULATION WILL ACTUALLY HELP RATHER THAN HARM SOME BIG TECH–BIG TECH HAS THE CASH TO COMPLY.

 

MARK ZUCKERBERG’S TRIP TO CAPITOL HILL DEMONSTRATED THE LIMITED KNOWLEDGE INDIVIDUAL CONGRESS PEOPLE HAVE REGARDING BOTH TECHNOLOGY AND BUSINESS.  CONGRESS IS NOT ALONE.  EVEN THOSE PAID TO KNOW SEEM LESS THEN CLEAR, OR LESS THEN ACCURATE.

 

 

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The media drums of “concern” have begun. Data as a business is the focus, with privacy and the integrity of national processes forming the current concerns. In STOCKjAW’s CROOKED HOURS we called out both regulation and public backlash as likely developments for our best and strongest companies. Both are here. The dense dark questions of big data, Big Brother, and AI-powered Ex Machina horror, have all been launched. Have you seen the campaign ad by a candidate for attorney general about “protecting our families privacy?” Guess who’s name floats on a screen in the background? Google. Now the “good” are attempting to save us from the ugly.

 

 

 

THE P/E RATIO WAS NOT CARRIED DOWN FROM THE MOUNT IN TABLET FORM.  BUT, THOSE WERE THE EARLY DAYS OF DISMAY AND QUEASINESS OVER AMAZON’S PRICE-TO-EARNINGS MULTIPLE.  SO YOU WANT THE BEST FOR THE PRICE OF THE REST?  HOW DOES THAT THINKING PERSIST?

 

ONE MORE FROM VOX COMPARING AMAZON’S PRICE-TO-EARNINGS RATIO AS COMPARED TO THE S&P 500.  THE THRUST WAS THAT AMAZON IS–WAIT–SAVAGELY OVER-PRICED.  AMZN’S SHARE PRICE IS CAST LIKE THIS–IT’S SHARE PRICE WOULD HAVE TO FALL 90% TO REACH THE MARKET AVERAGE OF 24.  THE IMPORT SEEMED MORE AN ATTEMPT TO BROADSIDE, RATHER THAN INFORM.  WHY?

 

THE REPORTER NEVER BOTHERED TO MENTION THAT AMAZON IS FAR FROM AVERAGE.  NO INCLUSION OF THE PEG RATIO–THE EARNINGS GROWTH RATE, THE NETWORK EFFECT, OR INDUSTRY POSITIONING.  THE TOOLS BELOW WILL SAVE YOU.  THEY WILL ALSO KEEP YOU FROM SAYING THINGS THAT MAKE NO SENSE.

 

 

Graphics, Price to E
This pair of unassuming metrics are amazing. They cut the yap and crap. Easy as pie to learn, make them yours forever. Like cutting tools? Us too.(SJGraphic.)

 

 

IN STOCKjAW’S MONEY CHOPS WE PRESENT THE TOOLS INVESTORS NEED IN ORDER TO CORRECTLY INCORPORATE FUNDAMENTAL ANALYSIS.  THE P/E RATIO IS OUR FOUNDATION VALUATION TOOL.  IT’S FUN, YET INCOMPLETE.  ADDING THE ADDITIONAL CALCULATION OFFERED BY THE PEG RATIO CREATES ACCURATE COMPARISONS; APPLES TO APPLES OR APPLES TO ORANGES.

 

WHY DO THESE SIMPLE CALCULATIONS?  BECAUSE DATA STREAMS WERE NEVER PERFECT AND AREN’T PERFECT NOW.  MISTAKES ARE GUARANTEED.  WE’VE FOUND P/E’S OFF BY A FACTOR OF 4.  WE PRESENT THE P/E AND PEG RATIOS NOW SO YOU CAN HAVE CONFIDENCE IN THE NUMBERS YOU MOVE ON.  YOU HAVE NOTHING TO LOSE, UNLESS YOU SIMPLY RELY ON OTHERS TO DO YOUR WORK.

 

 

Graphic, PEG ratio, X
Employing the PEG ratio allows true comparisons. Smart investors pay up for fast growth. Sometimes cheap is just cheap, not value. Best example–Amazon. Avoiding AMZN based on a high P/E misses the entire point. The PEG ratio is your first step toward truth.(SJGraphic.)

 

 

A PEG RATIO OF 1 IS CONSIDERED CHEAP.  2 IS CONSIDERED AS EXPENSIVE.  THE PEG RATIO ALONE DOES NOT DETERMINE VALUE OR WORTH.  THE HOLISTIC USE OF BOTH DISCIPLINES, FUNDAMENTAL AND TECHNICAL ANALYSIS, IS REQUIRED TO KNOW YOUR STOCK.  THESE RATIOS ARE WHERE YOU START.  TOOL ON.

 

 

Thanks for reading.

AAA Stockjaw scooter

STOCKJAW.COM

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https://pixabay.com/en/photos/
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Additional resources:

Investopedia.com.  Seriously Wonderful.  Fact.
http://www.investopedia.com/
Charles Schwab.  In Our Opinion, the best broker going.
https://www.schwab.com/public/schwab/client_home
STOCKJAW.COM EARNESTLY THANKS YOU FOR YOUR INTEREST AND WISHES YOU THE VERY BEST.  THE WORLD BEING WHAT IT IS, WE MUST POST THE FOLLOWING:  ALL CONTENT ON STOCKJAW.COM IS PURELY FOR GENERAL EDUCATIONAL AND ENTERTAINMENT PURPOSES ALONE.  ANY ACTION TAKEN BY ANY READER IS THE SOLE CHOICE AND RESPONSIBILITY OF SAID ACTOR.
Be careful.  Do the work.  Have patience, with yourself.  Never put your dreams away.
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