One of the ratios I use for analysing growth companies is the PEG ratio. I had shown in my article from 2014 how the best time to invest in Apple and Microsoft was when they were trading at very high P/E multiples (see the full article here). For example, I don't mind paying for a company at a P/E ratio of 100 as long as I believe it can grow for more than 100% over the next 2-3 years. This means the PEG has to be below 1.
Below is my quick computation of the PEG ratios of FANG and other tech companies. I've added the growth rate column, but it's only from 2017 to 2018. You need to decide for yourself whether these growth rates are high or low depending on the fundamentals of the business over the next 2-3 years. Also, since some of these companies have high net cash balances, I've adjusted the price for the cash per share in the books.
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A handful of places remain for SyndicateRoom's edtech investor event, An evening with Simon Calver, taking place in London on Monday 19th June.
Simon is one of the best known and regarded entrepreneurs and investors on the British tech scene. His accolades include heading up LOVEFiLM from startup to its sale to Amazon for a reported £200m, turning around an ailing Mothercare plc and, most recently, becoming a founding partner at BGF Ventures, a £200m fund supporting Britain's brightest founders.
As Chairman of UK Business Angels Association, Simon is a big advocate of angel investing and will be sharing his top tips in picking successful companies. He'll be joined by serial entrepreneur Ulrik Juul Christensen as well as a selection of exciting edtech startups.
Material contained within Master Investor Magazine and its website is for general information purposes only and is not intended to be relied upon by individual readers in making (or refraining from making) any specific investment decisions. Master Investor Ltd. does not accept any liability for any losses suffered by any user as a result or any such decision.
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