Investors with a bias against high P/E stocks miss some of the greatest stock market winners of all time. Over ten years or more, a high P/E company that’s growing earnings per share at a much faster rate eventually will outperform a lower P/E company growing at a slower rate. This will be true even if some valuation derating occurs in the interim period for the former. If it comes to a choice between a 15 percent grower at 15× P/E and a 30 percent grower at 30× P/E, investors always should choose the latter, particularly when longevity of growth is highly probable.
