The Wall Street Journal recently featured the article below discussing the relevance of P/E ratios to help a stock’s potential price or market value.  This may be true when talking about mid and large cap stocks with plenty of analyst coverage / estimates, and those companies typically are influenced by a number of macro economic factors.

However, the reality for small, micro, and nano cap GROWTH companies is that Price / Earnings is still one of the most relevant metrics for analyzing a fair value to pay for a company’s growth prospects.  A company with an above market P/E trades at those levels because it is expected to inherently grow significantly faster than both the market and its competitor peers, no ifs, ands or buts…… It is awarded that multiple because of expectations of a superior product or service that is taking market share from the competition.  If it disappoints on the earnings line, the P/E gets immediately out of whack, and the stock price gets smacked!  Whether or not it is their own guidance or that of some analysts, the prevailing wisdom is something is wrong. When the denominator misses expectations, the P/E inevitable adjusted.  True growth investors will always take this metric seriously and don’t believe otherwise…

WSJ Article: The Decline of the P/E Ratio

Best practices for IR firms using Twitter or other social networks are still uncertain. Genesis Select has entered the social media space looking to add value to the services that we offer our clients and deliver information to investors that will help them to better develop their portfolios. We recently came across an article on IR Web Report that offers up a few tips for IR firms looking to organize their Twitter presence. The article discusses the importance utilizing the Twitter lists function in order to monitor the various outlets that contribute news and opinion pertaining to the investment community. We’ve been successful in organizing our Twitter account in such a manner and will take away some great pointers offered by Dominic Jones of IR Web Report.

It’s still very early on Twitter for institutional investors and sell-side analysts, but IR Web Report has some interesting ideas on lists that companies can start with to target industry analysts, competitive companies, and journalists. Have a look see if it applies to your company.

Learn more about using Twitter lists and read the full article here: 5 Lists IR Twitter Accounts Should Have

Written by David Meier –

I love a great growth company as much as the next stock junkie, but growth for growth’s sake just doesn’t cut it for me. I want to see a company grow Foolishly, creating value even as it expands.

Why isn’t growth enough? Let’s say I start a business that earns 10% returns on capital. Unfortunately, it cost me 12% to get the capital I needed to get my business up and running. That means my business doesn’t generate enough of a return to pay back my investors. The more I grow, the further into the hole I sink. That’s not very Foolish.

Real-time assistance provider LivePerson (Nasdaq: LPSN) has produced Foolish growth for some time now. Its return on invested capital (ROIC) remains greater than 15%, while most companies’ cost of capital comes in between 8% and 12%. So not only is it creating value, it’s growing faster than the competition, as the following table shows:

Source: Capital IQ, a division of Standard & Poor’s, and author’s calculations.

The Foolish bottom line
Value and growth are joined at the hip. If a company’s management can’t find ways to grow sales while earning positive spreads on its investments along the way, I’d just as soon keep my capital in my pocket. Fortunately, LivePerson’s track record of creating value as it grows makes it well worth considering.