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.
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 time...ie, 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.