P/E Ration

is this right?

[whatson]

Why does Overture have such a low Price/Earnings ration, it is only about 14. Its an internet company, they are supposed to have really hight P/Es, or negative ones.
Can anyone explain this to me?

[Mardi_Gras]

they are supposed to have really hight P/Es, or negative ones.

Not sure this belongs in the Overture forum, but no stock (that you would consider buying) should have a really high P/E ratio, certainly not a negative one, unless there are some extraordinary forces at work.

Some Internet stocks do have high ratios because naive investors don't understand that Internet business is still business, and the laws of supply and demand and competition exist in the world of technology just as they do everyplace else. But until investors start demanding accountability, profits, and (God forbid!) dividends, you will continue to see many stocks priced outside the bounds of what a prudent investor would pay.

Overture, unlike Amazon or Yahoo, may actually be worth its current asking price, particularly in light of its recent price drop.

[whatson]

But Yahoos P/E ratio is over 100, even Microsoft's is about 30. But Overtures is only 14

[Mardi_Gras]

Yahoo's P/E ratio (and that of many other tech companies) is so high because investors are betting that the company's earnings will soar, and the price they pay for the stock today will seem like a bargain.

Whether or not that is a wise bet, I'll let others decide. I thought Amazon was overpriced at $10 a share and it has since doubled in value.