But here's a another good example that I think is really interesting. If you look at AutoZone, this is again another pure growth stock. You see how the price correlated with its PE ratio of 15.39.
This is PE equals to the growth rate. This isn't a perfect 15 PE, but it's roughly a 15PE. And you can see that as the stock got up here now, it went it it rose for three or four years.
This is the thing that really gets investors in my opinion. You can't know when it's going to stop. But all of a sudden, with earnings flattening a little bit, the stock is very vulnerable up here at almost a 30PE and that has already led to a correction of 32%.
Now, if I look at forecasting on this one, I'm looking at about 14% growth. The stock would still be, by my definition, overvalued here, but it's not dangerously overvalued from the standpoint of losing money.
You could still end up making a 5% rate of return based on 14% earnings growth, but you're obviously getting a lot less return here than the company's earnings would suggest you deserved. And by the way, you deserved, not the company.