Why I Don’t Care About the P/E Ratio
P/E is simply how much investors are paying for each dollar of earnings.
That’s it.
In the late 1990s, Yahoo traded at 938x earnings. By 2000, it traded at 1700x earnings.
The stock went up roughly 8000%.
High P/E did not stop it.
Now look at Tesla.
In 2020, Tesla traded above 500x earnings. It later pushed above 1100x earnings.
The stock kept going higher.
If you waited for it to look cheap, you missed the move.
Here’s what most investors miss:
In growth stocks, multiple compression is a symptom of slowing expectations.
Growth decelerates. Institutions distribute. The P/E contracts.
And that’s when retail investors buy it because it looks “cheap.”
That is how you get stuck in Stage 4 decline or dead money.
Low P/E does not create demand.
High P/E does not prevent it.
Price moves when growth accelerates and buyers compete.
Valuation comfort is not a catalyst.
Demand is.
