I’ve written many articles and answered many questions from the media, customers and at conferences about whether we are in another ‘Bubble’. After the “Dot.com Bubble” of the late 1990s, many think we are now in a 'Social Networking Bubble’.
My answer everytime is that the last time “A rising tide lifts all ships” applied. Stocks rose across the tech board – regardless of whether the companies had any connection with the internet. This time, the ‘Bubble’ seems to be confined only to those companies related to Social Media (LinkedIn, Twitter, Facebook and a thousand ‘me-toos’’) The vast majority of quoted SITS (and tech) stocks, we contend, are still fairly priced and have not ‘benefited/suffered’ from the bubble.
So I was really pleased to see George O’Connor (Panmure Gordon) latest sector valuation report entitled 'No froth here'. It contained an excellent chart which shows that the average ‘long run average P/E’ was 17.6x. Despite a modest increase since 2009, today it is still under that at 16.7x. And, of course, it is a half the high of 34x it reached in the Q1 2000 just before the dot.com bubble burst. Indeed Sage is currently on a P/E of 14.0. Back in early 2000, having been named as a UK Internet Stock, it was 182! It then had a share price of £10 and, despite increasing its EPS every year since, today Sage shares are 285p.