Hi all,
I have a question that I can’t wrap my head around. It is with regards to a fair (I know it’s subjective tho) evaluation of a firm in difficult times.
Let’s take Biontech. Currently P/E in the 10s?! They will reap billions over the next years from COVID vaccines and their technology will likely lead to other innovations so let’s assume they grow 15% annually over the next 10 years. Their P/E would be around the same, maybe 20 (other indicators deem a fair valuation too) all that time.
In 6 years the markets crash for whatever reason and because everything does, so does the stock price of Biontech. But people still have diseases and revenue comes in.
If the price plunges 50% with stable earnings/revenues……Would you agree with my conclusions:
1) Biontech would be subject to an overcorrection leading to an undervaluation (P/E would be even lower), therefore likely to bounce back to some degree 2) However the bounce back would only happen, if the markets loose the irrational emotions and stop panic selling. When that is over, the market will see the undervaluation and buy the stock
BUT: I just wonder for how long that could go. Is it possible, or being more precise, are there known examples where the markets have been low for a long time and with that the value of firms who do exceptionally well? That would be irrational.
I am asking since it makes sense to me to hold Biontech long term…10-15 years surely. But if a crash would come around and drag Biontech with it, I rather sell and take profits instead of buying the dips…because of the risk (however real that risk would be?!) that it takes forever to bounce back….
Hope this made sense and I am grateful for your thoughts.
Submitted August 19, 2021 at 09:44AM by Many-Coach6987 https://ift.tt/38bIbYx
