Cisco v Netflix: The irrational history of growth companies
Paul Wood of Woodhill Asset Management
Most market commentators believe that the valuation of a growth stock reflects the likely future growth rate of the company. Stocks trading at above average earnings multiples are expected to grow at above average rates.
In reality, high valuations often simply reflect how much growth has already taken place. They do not say anything about the future. Moreover, as the end market becomes saturated, as can happen with...
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