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I can't answer specifically about The Trade Desk, Twilio, or Shopify since I don't follow those stocks.

Regarding the big banks, JPM is the only one that isn't selling at a discount. C, WFC, and BAC are all trading at a discount relative to their fair value and make for pretty good buys (in my opinion) while JP Morgan might be a bit above fair value these days. If you look at JPM's ROE and ROA, yeah, they're noticeably better than the other banks. While Wells was up there, it's currently hamstringed by the asset cap. So I'd say yes, JP Morgan has a history of being well run, it largely stays out of trouble, and is more profitable on average than the other big banks.

PEG is a ratio, so if you're planning to use it to base your investment decisions on you need get very comfortable with the data sources for the numerator and denominator. Is the PE ratio based on trailing twelve month earnings or forward earnings? When was it updated last and how often is it updated from the source you're using? Were there any one time things that really boosted or depressed EPS that may have played havoc with the PE multiple if it was calculated automatically by a data source vs. done by hand to back out any strange one-time items? Where is the earnings per share growth number coming from for the denominator? Is it the trailing twelve month EPS growth, an average of the last five years, a forward EPS growth estimate of the next year, or a forward EPS growth estimate average of the next five years? And once you find out, do you agree with all of those inputs? There are many flavors of PE ratio and more still of PEG ratio. It's a single idea in concept but there are many implementations.

I would view the PEG ratio (especially an automatically generated one from a data feed) as a starting place to screen for stocks. If something jumps out at you as strange, that's a place to start investigating vs. using it as the actual investing decision maker. You can't value a company based on the PEG ratio alone because you're not considering such important things as the amount of debt and amount of cash on the balance sheet, capex requirements, working capital needs, runway for above average growth, and possible margin expansion or contraction.


How can The Trade Desk, a volatile growth stock with very exciting prospects, be at a PEG ratio of 2.32

In more normal times a PEG ratio of 2.32 would be considered pretty high. The rule of thumb is that a PEG ratio of 1 is about fairly valued. It's only in times like these with some very high valuations in some SaaS stocks that a PEG ratio of 2.32 would be considered low by comparison.

Shopify and Twilio don't have any earnings yet so the PE ratio is actually undefined. Given that, the PEG ratio is also undefined. So if your data source is actually giving you a number for those companies, they must be using a forward estimate of earnings that's actually positive, or maybe their software has problems with negative earnings and you should just ignore the source.

Disregarding that though, you can make a case for an extremely high PE ratio stock being a good buy if you can also make a good case for earnings increasing rapidly. The PE is a ratio, and you can compress it by either the price going down or the earnings going up. People who buy high PE ratio stocks are hoping for the latter if there's PE ratio compression!

The Trade Desk is a solidly profitable company, so it looks like it's further along the growth curve than Shopify and Twilio are (again, I don't know much about these companies, I'm just looking at some financial statements quick to write this). Both Shopify and Twilio are growing revenues very fast (faster than The Trade Desk), so my guess is the market is expecting these two companies to grow at a fast enough rate to scale up to where they can make a profit. Once profits start growing, the denominator on the PE ratio will go up, bringing PE ratio down all else equal, which would also bring the PEG ratio down.


Mike
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