Fair market? Explain these P/E ratios

Amazon’s price-to-earnings ratio is now 2,767. Apple’s is 13
[Via Brainstorm Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0]

The discrepancy in how the market values the two companies is too big to graph

FORTUNE — The ratio of share price to annual earnings — usually expressed as P/E or simply PE — is the simplest and most widely used metric to gauge the relative value of a pair of companies.

Case in point: Apple (AAPL) and Amazon (AMZN), two bellwether U.S. tech companies that reported quarterly earnings last week.

Apple’s earnings MORE


Apple has a P/E ratio of 13.06. Amazon has one of 2766.93. For next year that works out to 9.83 and  130.57 respectively.

Amazon is being treated like a great growth company even though it has low earnings with low growth. Apple is being treated as though it was a dowdy old company even though it has high earnings with high growth.

It has been this way for at least 4 years. The market is simply not fairly valuing Apple by almost any metric.

Which implies that Apple is not being fairly valued.