The previous article showing the profile of Apple’s growth vs. its P/E prompted a similar review of a set of comparable companies. The cohort is composed of:
We made one change to the growth data where the Net Income growth is not quarterly year-on-year but average of four quarters year-on-year. This reflects the fact that P/E is also a trailing twelve months’ earnings. It also has the benefit of smoothing the growth data making it easier to discern.
Here are the charts:
Note that all charts are to the same scale (P/E from zero to 50 and Net Income growth from -100% to 200%). Some clipping of the values is possible. Growth from unprofitable periods are undefined (i.e. when measuring growth from a to b, if a is negative, the data is omitted.) Growth from a positive period to a negative period is defined as -100% (i.e. when measuring growth from a to b, if b is negative, the value is defined as -1).
There are some anomalies, for example growth due to an acquisition or loss of profitability due to re-organizations, however the patterns are probably what matter most.
Next post will discuss the relationship between P/E and growth in the pre- and post-crisis time windows for all these companies.
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