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Comment by treeface | Hacker News Reader

Which tells you how meaningful the P/E ratio is when analyzed independently.

At some point it needs to come down though, one way or another. Not many are going to invest in a company which is guaranteed to have a P/E of > 200 indefinitely. This would mean a very low return on investment.

From a practical point of view, who cares? Unless they are selling their stock to raise revenue it matters not (to them) if people are willing to "invest in" their company.

Now their investors may care, and there may be board fights and so on, but if Bezos can control that then he has some leeway to build the company he wants. It's pretty impressive, really.

And it's very intriguing what's going on in Cambridge (MA). A lot of hiring and work and what-not yet nobody seems to know what they are doing.

Investors can't care. If they cared, the stock price would drop and take P/E with it. It fixes itself

The numbers were silly three months ago too, but AMZN was a much better investment since then than AAPL.

That's not the correct way to analyze P/E. Looking at that number in a vacuum is nigh on meaningless. P/E is best analyzed as a relative measure within a given market (in this case, online retailers w/ no brick and mortar presence).

That said, there are exceptions to every rule. I'm not aware of any other companies that currently exhibit such a high P/E.

What am I getting wrong, exactly? If a company is going to be a good long-term investment based on fundamentals, it needs to have a sensible P/E ratio. There are exceptions for companies that are growing or have a high probability of having higher earnings in the future. And of course a stock can make very big price movements with no change in fundamentals.

But in a long perspective, there needs to be a small ratio between what you paid for the stock and what the company earns if it is going to be a good investment. FYI I am heavily invested in Tesla Motors, which currently has an undefined/negative P/E ratio.

I don't disagree on seeking a sensible P/E ratio. I'm stating that in order to determine what qualifies as a sensible P/E ratio, you need to look at the industry/market the company operates in.

Amazon is a category killer just like Wal-Mart is and if their PE ratio is 14.38, then Amazon's P/E ratio should be in that area as well. In order to avoid being placed in that category, you have to do some disruptive things. It's similar to what most web based companies do, they try to shoot for the stars and keep that momentum going. I think that explains the high P/E.

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