|To: ProThinker who wrote (2763)||9/29/2017 10:48:33 AM|
|From: The Ox||3 Recommendations|
Recommended By Respond to of 2870
|There's a problem with those charts, IMO. Look at the first one and then all the others. |
Revenue expectations are going almost straight up. All the other charts are rolling over at a time when revenue expectations are saying something different! Over the past 3 or 4 years, FB has been exceptional at turning the increased revenue into higher EPS than was expected by the street. The charts display something very different, that FB will no longer be able to turn increasing revenue into bottom line earnings.
Naturally, the company will not grow EPS at a rate that they have done in the past but there is no reason to believe that they will slow dramatically. Even the analysts are all over the place with the consensus for next year to grow EPS at 22% but the most bullish view shows 33% EPS growth. Likewise, the more bullish view for this year is for 38% EPS growth while the consensus is closer to 24%. If we take the $171 stock price and divide by a 33 PE, we need the company to reach $5.18 in EPS (and expectations are currently for $5.33). If we take a 24% PE, we need the company to reach $7.13 in EPS. While that is 60 cents higher than next year's consensus estimate, it's still well below the most bullish current estimate of $7.81.
FB's EPS will grow slower, yes, that is a given. Just how slow is the main question when trying to view the company as overvalued today versus what they will do in the future.