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When considering the PE ratios of multinationals...including gold producers...

MGLICKERMGLICKER Posts: 7,995 ✭✭✭
...Please consider the interesting case of Ebay

They announced today that they would repatriate $9B from overseas and in doing so would incur US a tax liability of $3B.

As the large firms now conduct about half of their business overseas, when looking at PE, you may want to discount the non US taxed portion as bringing that money home is costly.

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Comments

  • bidaskbidask Posts: 13,834 ✭✭✭✭✭
    So what stocks do you own in considering this?
    I manage money. I earn money. I save money .
    I give away money. I collect money.
    I don’t love money . I do love the Lord God.




  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i>So what stocks do you own in considering this? >>



    Not really the issue. Point is the revered PE's do not adequately discount the value of much of a concerns income.
  • rawteam1rawteam1 Posts: 2,472 ✭✭✭
    Who reveres PE's???, surely no one that is makin serious dough in the stock market, amongst numerous others, amazon went from 36 to 3 hundo something or more, tesla, apple, countless others...

    PE 101 and Retail 101 are money losing props...
    keceph `anah
  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i>Who reveres PE's???, >>



    Amazon is unusual situation where many investors require little earnings from this 15 or 20 year old company. They seem to be starting to pay attention though.

    Any mature entity though, from Apple to IBM to GE to Google has a prominent following of PE chasers. Problem is though accounting changes and tax consequences upon earnings repatriations generally do not show an accurate picture of financial health.
  • cohodkcohodk Posts: 18,554 ✭✭✭✭✭
    you may want to discount the non US taxed portion as bringing that money home is costly.


    The market has already done this for you. Many stocks, especially Apple, trade at heavy discounts to cash per share when that cash is held overseas. The market is always smarter than we.

    In many, dare I say most, cases, low P/E means low growth. Low growth means low reward. This of course does not apply to stocks which have sudden and drastic changes in prices such as in 2008, but a mature steady eddie company with a low P/E is a lousy investment. One would be better off buying gold. image
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i>The market is always smarter than we. >>



    ...or more corrupted. The SP500 is showing a trailing PE of 18.8.

    Not bad, but figuring the liability of the un US taxed overseas earnings and those pesky little one time charges that we are supposed to ignore,a 25 price earnings ratio is closer to the truth. Survivable perhaps in a low interest environment, but dangerous when bond yields inevitable spike.
  • cohodkcohodk Posts: 18,554 ✭✭✭✭✭


    << <i>

    << <i>The market is always smarter than we. >>



    ...or more corrupted. The SP500 is showing a trailing PE of 18.8.

    Not bad, but figuring the liability of the un US taxed overseas earnings and those pesky little one time charges that we are supposed to ignore,a 25 price earnings ratio is closer to the truth. Survivable perhaps in a low interest environment, but dangerous when bond yields inevitable spike. >>



    when bond yields inevitable spike

    Inevitable is going to be much longer than we would want to think.

    but figuring the liability of the un US taxed overseas earnings and those pesky little one time charges that we are supposed to ignore,a 25 price earnings ratio is closer to the truth

    First, trailing earnings are useless. Second, you are discussing something the markets already know. There are no surprises. And why should overseas earnings ever be taxed? Maybe companies want to expand their businesses in these foreign countries. Why not just reinvest that money in the same country...afterall, it appears to be profitable. Who says Apple needs to be a US company? Tax the hell out them and they may just move. If I was CEO I would consider it, wouldnt you.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • rawteam1rawteam1 Posts: 2,472 ✭✭✭
    That's why Pfizer is buying AstraZeneca ...
    keceph `anah
  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i>Inevitable is going to be much longer than we would want to think. >>



    Investors often have short memories. Some younger ones have no memory of market cycles.

    In the 70's double digit inflation and high interest rates look like it would never end. today, even with inflation above 6%, interest rates look like they will never increase. They will though as investors tire of losing 4 or 5 or 6% per annum on their savings.

    The fed has been amazing with their smoke and mirrors, but even with the excessive manipulation started by Ben Bernanke (which he freely acknowledged) the debt markets will catch up with reality. They always do.





    << <i>First, trailing earnings are useless. >>



    In a bubble market, of course they are useless. More important are phrases like new paradigm and unchartered waters. Better to dream about the future than deal with the boring track record that does not align with our overpriced assets.





    << <i> Tax the hell out them and they may just move. If I was CEO I would consider it, wouldnt you. >>



    No, but I am not cut out for the ruthless world of corporate management.








































































    Yeesh....editing gone wrong.
    image
  • cohodkcohodk Posts: 18,554 ✭✭✭✭✭
    They will though as investors tire of losing 4 or 5 or 6% per annum on their savings.

    If you are a Japanese or European investor suffering through deflation, wouldnt you think a 3% yield on a US Treasury looks pretty darn good?

    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭


    << <i> They will though as investors tire of losing 4 or 5 or 6% per annum on their savings.

    If you are a Japanese or European investor suffering through deflation, wouldnt you think a 3% yield on a US Treasury looks pretty darn good? >>



    Do you really believe that the Japanese, with a 20% hike in oil and nearly that much of an increase in other imported goods in the last 18 months is really and truly in a deflationary cycle? By Yellen/Bernanke standards perhaps.
  • cohodkcohodk Posts: 18,554 ✭✭✭✭✭
    Your talking about the last 18 months in Japan, after 20 years of deflation. All it took was a debt level over 2x GDP. The USA would need another $20 trillion in debt to be in similar shoes.

    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

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