Have you noticed how, in the last month or so, people have stopped using forward earnings in their PE calculations? I remember, at the height of the Bubble, on lots of threads, a poster would get derided as hopelessly pessimistic if he didn't use EPS expectations at least 2 years out, when valuing a stock. And basing buying decisions on expected earnings 5-10 years out was not unusual. Now, no one talks any more about what they expect a company to do in a decade. And everyone has been burned by forward 12M EPS consensus estimates getting chopped in half, and then halved again. So, now, we are starting to do what used to be the norm (pre-bubble): use trailing 12M EPS, or the average of the past 5 years EPS growth.
Another pre-bubble pattern I think we are going to return to: before a new company is ready for its IPO, it needs to have 2-3 years of positive and growing earnings, so there is a track record (rather than just hopes and prayers) to use in evaluating and valuing the stock. Until then, it's a gamble, and not a good one, and only Venture Capitalists should get near it.
These are hopeful signs that sanity is returning. |
