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How FAST Graphs Draws Fair Valuation Reference Lines

2019-08-21

Introduction

This video is offered to clarify the misconception of how FAST Graphs applies its fair valuation reference lines on its graphs.  A comment on my recent video suggested that the 15 P/E ratio that is very commonly seen on most of our graphs is arbitrary and simply fictitiously applied to as the comment suggested “fit his narrative.” 

Here is the actual comment that I’m referring to:

“It’s an arbitrary number. it fits his narrative, so that’s why he uses it. a PE of 15 is completely meaningless for most of today’s growth stories AMZN, NFLX, CRM, ADBE, GOOGL, FB, etc. have never traded at a PE of 15, yet these are some of the greatest growth stories of a generation Chuck’s Fast Graphs are great for pointing out valuation variance on legacy dividend payers like KO, JNJ, PG. but his software is borderline useless for digital, service oriented companies that can scale overnight thanks to the internet Fast Graphs is nice, but it’s far and away from perfect as Chuck would like you to believe.”

What’s important about the above and why I am offering this retort is because this viewer clearly does not understand how FAST Graphs work.  For starters, we do not apply a P/E ratio of 15 as a fair valuation reference to the types of companies that he cited in his comment.  In this video, I will be utilizing several of those specific examples to illustrate the point.

However, in addition to clarifying how FAST Graphs work, I also want to point out some additional flaws in his logic.  Today’s so-called growth stories are very rare and only represent a small microcosm of the majority of companies trading on the US and Canadian stock exchanges that FAST Graphs covers.  Nevertheless, as I will illustrate in the video, FAST Graphs does apply valuation reference lines that are appropriate, useful and reflective of the incredible growth that these “digital, service oriented companies that can scale overnight thanks to the Internet” can be valued and evaluated as investments.

FAST Graphs Analyze Out Loud Video


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