How can Celgene (CELG) stock have a GAAP trailing-twelve-month 45x P/E and yet be cheap?
Let's add the fact that year-to-date, shares appreciated over 26%. It doesn't matter. I contend the shares are still inexpensive.
At the time I wrote this article, CELG was trading at $146.
Valuation Matters
In order to be a successful, long-term investor, determining fair value estimates for your stocks is critical. It's nearly impossible to beat the market by consistently overpaying for the merchandise. A FVE is a fact-centered opinion about what a stock is worth at a point in time. The manic-depressive Mr. Market tends to over-and-undershoot fair value. Fair value estimates are not static. It's a dynamic measure that may fluctuate based upon company fundamentals. Earnings and cash flow estimates are prime movers. The principle behind equity FVEs rest upon a straightforward, underlying premise:
