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Companies are valued based on future cash flows. A stable company typically has a P/E ratio of 20. Meta’s is around 10, which is an indication the market believ

• voisin 4y ago
  > A stable company typically has a P/E ratio of 20. This depends on interest rates, inflation, relative attractiveness of the industry (concentration, ease of entry, etc).
• bluedevil2k 4y ago
  > the market believes profits will cut in half and then stabilize. This isn’t true. The market believes Meta will still grow, just slower than before. If they believe growth is zero, as you indicate with “stabilize”, their PE ratio will plummet even further.
• type-r 4y ago
  pe ratios tend to be closer to 15 over the long term. some good data here https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
• JumpCrisscross 4y ago
  > stable company typically has a P/E ratio of 20 This is a 5% earnings yield. That's a whopping 99 basis points ahead of the 1-year rate and 103 north of the 6-month [1]. One can adjust for growth [2]. But a neutral 20x multiple is not a fact of nature. [1] https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView https://home.treasury.gov/resource-center/data-chart-center/... [2] https://en.wikipedia.org/wiki/PEG_ratio https://en.wikipedia.org/wiki/PEG_ratio