P/E, P/S, and P/B
The Price-to-Earnings Ratio is probably the most popular fundamental metric out there. So, let’s see what this measure of valuation look like for the 2021 performance buckets:
This result was surprising to me. I might have expected higher P/E ratios for stocks that have done better. In fact, if you ignore the worst three buckets, it seems to be that better performing stocks tend to lower P/E ratios. What’s nice about this is, it’s consistent with the general rule of thumb to buy lower P/E stocks. Turns out, you don’t have to overpay to outperform.
The Price-to-Sales ratio, however, doesn’t tell much of a story:
And, Price-to-Book maybe has a slight upward trend but it’s not convincing one way or the other:
In general then, we can’t really take a lot away from this. Perhaps, all the focus on valuation isn’t as productive as we want to believe!