Stocks with consistently high return ratios are the market darlings. So, they keep getting re-rated higher, again and again. Meanwhile, a few of the other high return stocks lose their edge.
The excess returns in a sector attracts more competition. This, in turn, reduces the profitability of all players.
Stocks of companies which have return ratios significantly higher than the cost of capital are the clear winners.
Naturally, investors buying into stocks with PE multiples of 100x or more have steep expectations from them.
It's here that I see lots of cracks in the valuation multiples over next couple of months.
Tanushree Banerjee (Research Analyst), is the editor of Stock Select and Forever Stocks. Tanushree started her career at Equitymaster covering the banking and financial sector stocks and scrutinising RBI policies. Over the last decade, she developed Equitymaster's research processes that helped us pick out various multibaggers, across all sectors. A firm believer of "safety first" when it comes to investing, Tanushree closely follows the investing philosophies of Warren Buffett, Jeremy Grantham, and Joel Greenblatt.
Equitymaster requests your view! Post a comment on "What Next for 100 PE Stocks?". Click here!
1 Responses to "What Next for 100 PE Stocks?"
Nitin Jadhav
Jul 17, 2022Hello