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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Mar 12, 2003 7:07 PM Flag

    Margins and ratios

    Subj: Re: Margins and ratios
    By: aluisious81
    Date: 03/12/03 11:01 am

    "Investors won't go for falling earnings. There's no future there. "

    Well, thanks for the input ... but I was looking more for a number.

    Maybe I can ask another way. At what multiple of annual earnings do folks feel that NLS becomes a good buy? 4 times? 3 times? 2 times? 6 months' earnings?

    And if earnings growth is the only thing that gives investments value then why have the bond wonks bid 10-year treasuries up to more than 25 times annual earnings on that investment?
    Those earnings don't grow at all, yet people are paying a huge premium -- presumably to avoid risk of earnings decrease.

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    • You're answering your own question. People pay premiums for *earnings they believe in.* If earnings are going to vanish, people won't pay much at all for the stock.

      As for earnings...they don't get distributed to shareholders. You don't see a single cent of any of those earnings if the company goes bankrupt later. The company is only worth investing in if it's going to last for a long, if an investor can sell their stock to someone else one day. The lowest PE in the world doesn't mean dink if people think the company is going under sooner or later.

      • 1 Reply to aluisious81
      • Aloisius, you inadvertently left out your favorite multiple of earnings (that would be a number, typically an integer between 1 and 20). Care to take another stab at it. PE = 2? PE = 1?

        In my primitive mind, I'm thinking that slowly-growing earnings are just slightly different from earnings that "are going to vanish". Did I get that wrong?

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