Course 404: Aggressive-Growth Stocks
How Expensive Is It?
In this course
1 Introduction
2 Is Cash Flow in Line with Earnings?
3 Has Growth Hurt the Balance Sheet?
4 What Are the Trends in Growth Rates?
5 How Consistent Is the Company's Growth?
6 Are Free Cash Flows Positive or Negative?
7 How Much Does the Company Earn on Its Capital?
8 How Has the Stock Performed?
9 How Expensive Is It?
10 How Does the PEG Ratio Compare with Those of Similar Firms?
11 Conclusion: Knowing the Odds

The high hopes harbored for Starbucks show up in its valuations. Even after falling from their highs, the company's shares still traded at 45 times earnings as of January 2000, above the average for the S&P 500. Of course, a company growing as rapidly as Starbucks may deserve to trade at above-average valuations. But comparing Starbucks with the broader market puts its valuations in perspective. The average aggressive-growth stock has a price/earnings ratio (P/E) nearly twice Starbucks' (as of January 2000), so Starbucks doesn't look like too bad a value.

Next: How Does the PEG Ratio Compare with Those of Similar Firms? >>


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