QUOTE (Y2HH @ May 25, 2012 -> 10:12 AM)
All of these recent IPO's are a sure sign of .COM 2.0's arrival.
LinkedIn: Current Price: 97.70 (Giving them a P/E Ratio of a massive 603.76)
Groupon: Current Price: 12.05 (No P/E ratio, as they make no money, and are currently losing .33 cents per share)
Facebook: Current Price: 32.20 (Giving them a P/E Ratio of 103.06)
Q: What is P/E ratio?
A: A valuation ratio of a company's current share price compared to its per-share earnings.
In short: The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.
A "fair" P/E ratio is usually in the 10-20 range (give or take). Even companies like Apple, Microsoft, IBM, Exxon and Google trade in that range.
If Apple was trading at the P/E ratio of Facebook, it would be trading at $4,227 per share.
If Apple was trading at the P/E ratio of LinkedIn, it would be trading at $24,766 per share.
That is how insanely overvalued those companies are.