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IPO Lucky ShotWhy do I think it will have risen almost to 140 before the new positive earnings report?
Because 20 times PE × 6.87 EPS = 137.4
The price-to-earnings ratio valuation model is very simple and crude, but it's very useful in actual trading. This is because, in a healthy market, the short-term price center depends on the consensus of the majority. Trading in waves essentially means finding short-term consensus. Most people don't have a professional financial background and won't use overly complex models for precise valuation calculations.
You have to try to have a dialogue with the collective consciousness behind the cold numbers, find patterns, and verify them. Otherwise, you'll be led by the market your whole life. 😄
$Duolingo(DUOL.US) is trying to provide a simple valuation model that is currently applicable. If there are better valuation models, we welcome everyone to discuss, exchange, and learn together. I really enjoy building valuation models and then using the model to reverse-engineer the market situation 😄
Under the condition of maintaining the full-year guidance unchanged
15x P/E ✖️ 6.87 EPS = 103.05
A fluctuation of about $5 up or down is roughly today's price movement.
If we interpret the market using this model, it seems Wall Street isn't fully bullish or bearish, but rather waiting for a direction.
If bearish on low single-digit growth or no growth, it should be given an 8-10x P/E. Giving it a 15x P/E implies recognition of management's execution capability. Management perfectly achieved their preset metrics this quarter, although these metrics are not financial ones.
And if these metrics can be monetized in the future, presumably Wall Street won't be stingy in rewarding it with a 20-30x P/E.
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