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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 244.68

+2.6%

Jan 27 3:59 PM EST

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To: Glenn D. Rudolph who wrote (101278)	4/16/2000 11:28:00 PM
From: Bearded One	Read Replies (5) of 164685

The point is, Glenn, there was a reason that PE/G of 1 is a good rule-of-thumb. Take the earnings, compound it by the earnings growth over a few years, and you get a guess as to the total earnings over that time period assuming constant growth, ignoring inflation. That was a rough estimate of how much the company could pay back its investors for owning the stock. A PE/G of greater than 1 means that the companies growth in earnings has to accellerate to generate earnings that justify its stock price. People don't realize that even for a company that is growing at 50% or 100% a year, it will never justify its stock price at that rate if the P/E is 200 or 300. Now you can make arguments about re-investing earnings, and 'earnings are for losers' and all that, but people should at least start from the point of knowing the math before they throw it away. And they don't start from that position.

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