Small companies trade at a median 37 times earnings, against 24 for large ones, a gap of 13 points. Price to book tells the same story, 5.5 against 3.6. The Reserve Bank raised the repo rate to 5.50 per cent on 7 October, so money has stopped getting cheaper.<\/p>\n
Costlier money hits smaller firms in three ways. Loans reprice quickly, so borrowing eats into profit. Demand for consumer credit and capital goods slows after a few quarters. And when the ten year yield sits near 7.2 per cent, a stock at 37 times earns you only about 2.7 per cent, making distant profits worth less today.<\/p>\n
Selection matters more than the asset class. Screen for a five year return on equity above 15 per cent and borrowings under half of net worth, because only a minority clear both. So spread your buying across several months, cap this bucket at a size a 30 per cent fall would not upset, and wait patiently.<\/p>\n","protected":false},"excerpt":{"rendered":"
Small companies trade at a median 37 times earnings, against 24 for large ones, a gap of 13 points. Price to book tells the same story, 5.5 against 3.6. The Reserve Bank raised the repo rate to 5.50 per cent on 7 October, so money has stopped getting cheaper. Costlier money hits smaller firms in… Read More »Are small companies worth paying thirty seven times earnings for right now<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26],"tags":[],"class_list":["post-5047","post","type-post","status-publish","format-standard","hentry","category-investments"],"_links":{"self":[{"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/posts\/5047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/comments?post=5047"}],"version-history":[{"count":1,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/posts\/5047\/revisions"}],"predecessor-version":[{"id":5048,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/posts\/5047\/revisions\/5048"}],"wp:attachment":[{"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/media?parent=5047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/categories?post=5047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maxiomwealth.com\/askguru\/wp-json\/wp\/v2\/tags?post=5047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}