RE: Price to Earnings ratios30 Oct 2025 08:51
To give one example, at the beginning, Shopify made its first profit - a tiny $1 million of earnings. This generated a 14,960 PE ratio.
In Amazon's first profitable quarter after the dot com bubble in 2001, their PE was over 1100 but it stayed above 500 for years and years.
These are examples of big companies, but they weren't big then (which is the point). With smaller companies (like microcaps) this - called denominator shock - is actually even more pronounced.
If you look at Ouster which is a lidar tech company which spend years in the loss making R&D phase (like us), in its first revenue it generated an Earnings Per Share of 1 cent and a share price of $10 (market cap of $200M, similar to us) leavinging a PE ratio in the 10,000 range. At this point, all their metrics were similar to Quadrise: a decade or more of loss making R&D without a single sale, low market cap and share price. On their first tiny revenue they were celebrating their £10 party.