If a company's EPS is growing at 50% rate year-over-year, what is the reasonable P/E range for that company? If a company's EPS is growing at 100% rate year-over-year, what is the reasonable P/E range for that company? I ask this is because there are tens of Chinese companies currently grow at 100%+ rate and P/E only 50-80 I bought a company growing at 50% rate, and current P/E at 22 and P/B at 2. I think the P/E should be at 40 level.
You may want to look at a valuation measure known as PEG, which is (P/E) / (Earnings Growth Rate). For example, if P/E is 20, and earnings growth is 10% a year, the PEG is 2. It's believed that anything below 1 as measured by PEG qualifies as value. I am not sure that it's applicable to Chinese companies, though, because of the accounting methods used.
peg is forward looking, so many companies on yahoo finance don't have this ratio. i was looking a past peg ratio, though. ps: please relax on chinese accounting methods. they are much cleaner than 2-3 years ago.
"Reasonable" is a pretty subjective term. Arguments can be made for ignoring PE altogether if you are a growth investor. PE's of 100 can be a bargain and PEs of 5 could be grossly overpriced.