Two Weirdly-Valued Stocks: If You Ignored Company Names, What Would You Think?
One has a widening profit margins as it grows, suggesting healthy economies of scale. The other gives up profit margins with growth, suggesting diseconomies of scale or, very basically, selling dollar bills for 99 cents apiece.
Despite this significant outperformance by one company, their five-year price gains are remarkably similar, as seen in a stock chart.
The market would seem more focused on revenue (and its growth), even though for one company increases in revenue have been very low-profit (or no-profit), and the other mints money on its growth.
Leading us to the oddest comparison of all, PE ratio. A dollar of Amazon profit costs an investor 350 times what she’d pay for a dollar of Apple profit.
Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at firstname.lastname@example.org.