(New York Times) When it comes to suspending disbelief about a lack of profits — the only thing that ultimately matters when it comes to stock valuation — Amazon.com has been in a class of its own. Its price-to-earnings ratio, a common measure of stock valuation, has at various times topped 3,000 (the market average is about 18) — and that"s when it actually has had a profit.
Investors never seemed to care. "Over the long history of the last eight years, this stock went from $60 to $400, which made all the doubters look stupid while all the believers got rich," said Bruce Greenwald, a professor and head of the value investing program at Columbia Business School. "The fact that Amazon did this in the face of deteriorating operating performance — slower growth in sales and the evaporation in profit margins — has made fools of the people who looked at the reality of its operations."
That may be changing.
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