Investment Q&A

Thank you; on P/E, we will almost always utilize forward earnings estimates. In other words, what is expected in the next year. Sometimes there are no forecasts, however. But when there are, and a company is growing, its P/E ratio can be very different looking forward rather than looking at the past. VRT is a good example. In 2022, it made just 18c per share. 2023, when numbers come out, should be $1.75 per share. So on 2023 numbers (they are historical now but not yet released), P/E is only 35X. Going into 2024, the company is expected to make $2.24 per share, so P/E drops to 27X if we use 2024 numbers. So, while the stock has certainly soared, the valuation has been kept more in check because of its very strong earnings growth. We also like to compare P/Es to historical averages. A company like COST has always been on the expensive side of valuation, so being 'expensive' now is nothing new. It is 45X earnings, but on 2024 numbers 41X. Its 10 year average is about 36X, so more expensive than usual but not hugely out of line. Its P/E in the past decade at times has been higher than 50X. CSU is 47X, or 37X forward. That is actually a fair degree below its 10 year average. P/Es will vary with the industry, growth, execution, interest rates and other factors. We cannot say that COST and CSU are 'cheap', by any stretch, but we also wouldn't say they are overpriced, at least versus their own history.