Should start by saying we don't have a PE because we don't have any profit (although we are nudging closer as you suggest). So when we actually make our first dollar of profit we will have a very high PE. E.g. we make a profit of $1 million and our SP is $1 (150 million shares) so a market cap of $150 million. PE=150. We are not in a position to pay dividends because we need the money to expand (new sales people, new equipment etc). In theory our profit will go up but all things considered our SP won't go up at the same rate ($2 M profit wont create a $2 share price). But what will happen is the PE will start to come down. By the time the company starts to pay dividends (more than a token amount) we will be well under a PE of 30. The company will have more money than it can reinvest and so dishes it out. By definition companies can't be high PE and large dividend payers. Apple (APPL) PE 37, dividend pay-out 0.45% Where as WOW pay out almost all their profits in Dividends . If anyone can find an example High PE and High dividend please advise
SMN Price at posting:
50.0¢ Sentiment: Hold Disclosure: Held
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