These shares are expensive for a reason

There’s a reason why some stocks are expensive... The P/E ratio of 27x for the “Magnificent 7” is well above the 17x ratio for the remaining 493 stocks included in the U.S. benchmark index, the S&P 500. On the other hand, the (expected) difference in sales growth somewhat justifies the valuation premium. In fact, the CAGR for revenue growth from 2023 to 2025 is 11 percent for the Magnificent 7, compared to 3 percent for the rest of the stocks included in this index.

There are stocks are expensive for a reason… The 27x P/E multiple for ‘Magnificent 7’ is well above the 17x multiple for the remaining 493 stocks included in the US benchmark S&P500. On the other hand, the (expected) sales growth differential slightly justifies the valuation premium. In fact, the 2023-2025 CAGR sales growth is 11 percent for Magnificent 7 compared to 3 percent for the rest of the stocks included in this index.

The Magnificent Seven stocks – S&P 500 giants Amazon.com (AMZN), Apple (AAPL), Google’s parent company Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) – have been grouped together since the start of the bull market in January 2023.

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