The Emerge Gaming Ltd (ASX: EM1) share price opened as much as 20% higher to 4.6 cents this morning after the company announced a subscriber milestone for its MIGGSTER gaming platform.

At the time of writing, the company’s shares have pulled back slightly to 4.2 cents, still up by 10.53% for the day so far.

What’s driving the Emerge Gaming share price?

Emerge Gaming shares are on the move today after the company announced it has surpassed the 1 million paid subscriber milestone for its MIGGSTER platform.

MIGGSTER aims to build an online gaming community with features such as chat, friends and team functionality. Users can pay a monthly subscription fee of A$12.00 per month or an annual subscription of A$113 to access more than 100 games and participate in all worldwide tournaments.

Emerge described the 1 million paid subscriber figure as a key milestone in reaching its goal of “building a globally recognised community which will enable the company to target a broader audience and additional revenue opportunities”.

Commenting on this achievement, Emerge Gaming CEO Gregory Stevens said:

I am excited by the achievement of this milestone for the MIGGSTER platform and the progress of our overall growth strategy in Emerge. MIGGSTER demonstrates that our platforms are globally scalable in a profitable manner – it provides an excellent, real world case study which we will use to unlock other opportunities with new partners. Our next milestone is to achieve a 1.5 million paid subscriber community size across all products. As part of the first phase of this growth strategy, we are seeking to rapidly grow subscriber numbers by offering a variety of discounted promotional offerings to prospective subscribers

Foolish takeaway

Emerge Gaming shares have surged by more than 130% over the past 12 months. Year to date, however, the company’s shares are not faring so well, and are down by nearly 47%. Based on the current share price, Emerge has a market capitalisation of around $47 million.

The post Why the Emerge Gaming (ASX:EM1) share price is up 11% today appeared first on The Motley Fool Australia.

More reading

• Why the Emerge Gaming (ASX:EM1) share price soared 33% today

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Chalice Mining Ltd (ASX: CHN) share price jumped this morning after it released positive exploration results.

The Chalice share price rallied 2.7% to $8.63 when the S&P/ASX 200 Index (Index:^AXJO) added less than 0.1% at the time of writing.

While other ASX mining shares are outpacing the broader market with the BHP Group Ltd (ASX: BHP) share price and South32 Ltd (ASX: S32) share price gaining less than 1% each, Chalice was the standout.

Chalice share price jumps on potential big find

The market got excited about Chalice as it unveiled its ground gravity survey and soil sampling results at Julimar project.

The gravity data indicated the presence of a largely continuous gravity high extending over 26km. Management is hopeful that they have uncovered a substantial nickel (Ni) and copper (Cu) ore body.

“Several extensive Ni-Cu+/-Pd soil anomalies identified associated with gravity highs,” said the miner.

“And, in some cases, coincident with airborne EM anomalies at the Baudin, Jansz and new Drummond targets.”

Energised by nickel, copper and palladium

The positive data was reinforced by soil samples collected by Chalice. This was done by a first-pass screening technique to assess and prioritise targets.

“Numerous new low-level nickel and copper +/- palladium soil anomalies have been defined along the Complex, which are comparable to the initial anomalies delineated along an east-west traverse across Gonneville pre-discovery,” added Chalice.

“Background metal content in soils was approximately 25ppm nickel, 5ppm copper and <1ppb palladium across the entire dataset.

“Values above 80ppm nickel, 20ppm copper and 5ppb palladium are considered highly anomalous.”

Commodities supercycle adding to Chalice share price gains

This is a good time to be announcing big finds. Commodity prices have skyrocketed as the global trend towards electric vehicles and green tech will boost demand for copper and nickel.

The Chalice share price is likely to exit this financial year as the top performing ASX mining share on the ASX 200.

Top ASX 200 performers for FY21

Chalice has surged over 700% over the past year with the Pilbara Minerals Ltd (ASX: PLS) share price in second place with a circa 300% increase.

The Galaxy Resources Limited (ASX: GXY) share price is following close behind with similar a similar gain.

No doubt its proposed merger with fellow lithium miner Orocobre Limited (ASX: ORE) has given it a big boost.

The post Why the Chalice Mining (ASX:CHN) share price is outperforming today appeared first on The Motley Fool Australia.

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Brendon Lau owns shares of BHP Group Ltd, Galaxy Resources Limited, Orocobre Limited and South32 Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The ResMed Inc (ASX: RMD) share price has been a positive performer over the last 12 months.

Since this time last year, the sleep treatment focused medical device company’s shares have risen a sizeable 18%.

Is it too to buy ResMed shares?

According to one leading broker, the ResMed share price could be nearing its full value.

A note out of Goldman Sachs this morning reveals that its analysts have retained their neutral rating and $28.40 price target on the company’s shares.

This compares to the latest ResMed share price of $27.15.

What did the broker say?

The broker notes that ResMed recently presented at its Annual Global Healthcare Conference.

At the event, ResMed’s COO, Rob Douglas, spoke positively about recent trading and a new product launch, which could capitalise on competitor challenges.

However, Mr Douglas also revealed that supply chain issues could put pressure on its near term costs.

Current trading

Goldman commented: “With vaccine roll-out progressing well in most key markets, RMD sees scope to reach pre-Covid-19 levels of new patient starts within the next two quarters. In our view, evidence of this recovery is the key factor to support a sustained re-rating in the stock.”

“Management acknowledges that the cumulative impact of fewer diagnoses through the trailing quarters is now a headwind to mask growth, but believes this will normalise relatively quickly as diagnoses continue to recover (we estimate c.20% of mask sales are derived through new patient starts).”

Cost pressures

Commenting on cost pressures, Goldman said: “In line with many other medical device manufacturers, RMD is currently encountering various pressures across its supply chain (most notably the availability and cost of freight). One of the more attractive features of the business over the last decade has been the consistent ability to grow revenue ahead of costs. With cost growth now increasing and revenues not yet normalised we see scope for near-term margin pressure.”

Though, the broker points out that “management was keen to emphasise the target to continue to deliver positive operating leverage through the mid/longer-term.”

New product launch

Goldman Sachs also notes that the launch of its new flow generator, AirSense 11, could be a boost to sales.

It explained: “Historically, a new launch has tended to precede a modest uptick in device sales growth; generally due to more favourable pricing on the legacy portfolio. Following the €250m provision recently announced by Philips for a corrective field action for its DreamStation1, there has been some debate about the extent to which RMD can capitalise. Whilst certain customers have contacted them to enquire around their scope to backfill, RMD was keen to emphasise that their primary focus is ensuring the best outcomes for patients overall.”

Neutral rating

While Goldman Sachs remains positive on the long term, it isn’t recommending the ResMed share price as a buy just yet.

It concluded: “We retain a positive view on mid-/long-term fundamentals, but maintain a Neutral rating RMD on short-term challenges and valuation grounds.”

The post Is the ResMed (ASX:RMD) share price good value? appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Austal Limited (ASX: ASB) share price is lifting this morning after the company announced a contract award.

This comes after news earlier this week of a different shipbuilding contract.

At the time of writing, the Austal share price is swapping hands for $2.34, up 1.30%.

Details of the contract

In this morning’s release, Austal revealed it has been awarded a US$44 million contract from the United States Navy.

The fixed-price deal will see Austal design and develop an autonomous capability on the future USNS Apalachicola, an expeditionary fast transport (EPF) vessel. The shipbuilder has delivered a total of 12 Spearhead-class EPF vessels for the United States Navy.

Austal CEO Paddy Gregg welcomed the contract, saying:

Austal noted in our half year results presentation that the funding for an autonomous EPF conversion contract had been appropriated in the USA Government 2021 Budget, so we are pleased that it has now been converted into a formal contract.

Winning a $44 million contract is welcome from a revenue perspective, but strategically this contract award is even more significant for Austal.

Autonomous vessel capability has been identified as an area of strategic importance by the US Navy, so it is promising for Austal that the US Navy has awarded Austal USA a contract for the design, procurement, production implementation and demonstration of autonomous capability of one of our vessels, the Expeditionary Fast Transport (EPF) 13, the future USNS Apalachicola.

About the Spearhead-class EPF program

The Spearhead-class EPF is a 103-metre high-speed aluminium catamaran. The vessel has an 1,800 square metre cargo deck, medium-lift helicopter deck and can hold more than 300 troops.

The primary function of the EPF is to provide rapid transit and deployment of military forces, and equipment and supplies. The ship can also be used for maritime security operations to deploy humanitarian aid and disaster relief.

Austal share price summary

Austal shares have continued to trend lower over the the last 12 months by more than 30%. The company’s shares are around 15% up from their 52-week low of $1.98 seen in February.

Based on its share price, Austal ranks 326 on the ASX in terms of market capitalisation, valued at $836 million. The company has approximately 359.5 million shares on its registry.

The post Why the Austal (ASX:ASB) share price is rising today appeared first on The Motley Fool Australia.

More reading

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• Austal (ASX:ASB) share price lower despite new contract bid
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Ramsay Health Care Limited (ASX: RHC) share price has been on a rollercoaster ride recently.

Shares in the health care company reached a high of $69.49 in November only to fall as low as $58.71 in January. At the time of writing, the Ramsay Health share is trading at $63.66, up 2.22%.

Despite the volatility, it appears that brokers are positive about the future of the company. We take a look at some of the reasons why. 

A major acquisition

Ramsay Health Care announced last month that it was putting a cash offer to acquire the UK-based Spire Group. Spire is an independent hospital group focused on the private patient market and a leading provider of high-acuity care.

The UK acquisition appears to be a logical step for Australia’s largest private hospital provider.

As described in its company literature, Ramsay “provides quality health care through a global network of clinical practice, teaching and research”. The company says its global network extends across 10 countries, with more than eight million admissions/patient visits to its facilities in more than 460 locations.

Which brokers are positive on the company?

Citi Bank yesterday upgraded Ramsay Health Care to a buy.  The broker attributed to rating upgrade to the recent fall in the Ramsay share price and the fact that company has underperformed the ASX 200 by 14% in the last quarter. 

Citi expects an big upside with the Spire acquisition, COVID-19 restrictions being lifted and hospitals getting back to normal.

Analysts at Macquarie are also positive about the healthcare company.  Macquarie has retained its outperform rating and $74.85 price target on Ramsay Health Care.

Macquarie believes that the Spire deal stems well for the Ramsay share price and long term growth in the lucrative UK market.

With the Ramsay share price currently trading around $63, Macquarie’s price target is a whopping 20% upgrade on the current price.

.

The post Why brokers give the Ramsay Health (ASX:RHC) share price a thumbs up appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Intega Group Ltd (ASX: ITG) share price is pushing higher today following its recent update.

At the time of writing, the Intega share price is trading hands at 51.5 cents, up 12%.

What’s lifting the Intega share price?

Intega Group is an engineering services provider offering environmental testing, geotechnical engineering, quality assurance, etc.

Investors are buying up Intega’s shares today after the company announced it has commenced a strategic review.

The decision follows increased activity and interest in the sector. Intega’s chairman, Neville Buch said:

“Intega is performing well, and the business is ideally positioned to benefit from the strong pipeline of infrastructure investment in the US and Australia. The business has significant organic and inorganic growth potential, particularly in our core US markets as well as adjacencies. The board however believes that the business is undervalued by recent prices at which Intega shares have traded on the ASX…”

Additionally, the review’s objective is to evaluate options for maximising shareholder value – including exploring ownership options for Intega.

The company’s largest shareholder, Crescent Capital Partners, has supported the decision. Greenhill & Co have been engaged for financial advisory. While Intega has also gone with Gilbert + Tobin for its legal advisory.

Taking a card from Cardno

That interest in the sector that Intega is referring to might be relating to Cardno Limited(ASX: CDD). With a market capitalisation of $340 million, Cardno is the bigger engineering company, which previously owned Intega.

Cardno also announced this morning that it would be conducting a strategic review after receiving numerous approaches from interested parties.

While the Intega share price is rising, the company noted there is no certainty of any particular outcome or transaction.

The post Intega Group (ASX:ITG) share price jumps 13% on latest update appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

About a month ago, Colonial Pipeline was attacked with ransomware by a group we now know is called DarkSide. The fuel-supply chain for the Eastern U.S. faced disruption, so the company reportedly elected to pay the nearly $5 million ransom in popular cryptocurrency Bitcoin (CRYPTO: BTC) to quickly return to normal operations.

But the general public lamented the loss. There was no hope of catching the bad guys because Bitcoin is completely untraceable. Or is it?

According to a press release from the Department of Justice yesterday, U.S. federal authorities have recovered 63.7 bitcoins, worth over $2 million, and this appears to have caused a sell-off in the cryptocurrency market. According to CoinDesk, the price of Bitcoin has plummeted roughly 12% over the past 24 hours. And Bitcoin stocks like Marathon Digital Holdings (NASDAQ: MARA), Riot Blockchain (NASDAQ: RIOT), Grayscale Bitcoin Trust (OTC: GBTC), and Grayscale Digital Large Cap Fund (OTC: GDLC) are all down as a result. As of noon EDT, these were down 8%, 7%, 11%, and 13%, respectively.

So what

There are a lot of reasons someone might buy Bitcoin. But security is among the reasons many are bullish on cryptocurrencies and blockchains, in general — people perceive these as untraceable, immutable ledgers. But authorities were somehow able to track down Colonial Pipeline’s ransom payment, break in, and recover a large part. This seems to fly in the face of one of the key Bitcoin tenets and is the reason Bitcoin and other cryptocurrencies are down so sharply today.

But perhaps there’s a fair bit of misunderstanding surrounding this situation. Bitcoin is stored in Bitcoin wallets, and these wallets have addresses. People can send and receive bitcoins if they know each other’s addresses.

However, each wallet comes with a set of keys — an assigned password so to speak — to keep things safe. But storing keys in a safe place has always been a problem. Those who hold bitcoins are urged to hide their keys, lest someone steal them.

It’s not yet apparent how the FBI got hold of DarkSide’s keys. And with the keys, it obtained a warrant to seize the bitcoins. But here’s the thing: The Bitcoin blockchain ledger is public information. You can see how much is being sent and to which addresses. You just don’t know the identity of the person who owns the Bitcoin wallet. For example, I just watched a roughly $200,000 transaction go through by looking in the Explorer section of Blockchain.com.

Because the ledger is public, it was relatively easy to track Colonial Pipeline’s payment to the right address. How the FBI got DarkSide’s keys is another matter. But either way, nothing was “hacked” with the Bitcoin blockchain network itself.

The transaction went through like it’s supposed to. Therefore, I believe it’s still fair to say that Bitcoin is a secure network. Whether your personal Bitcoin wallet is secure, however, is another matter.

Bitcoin may or may not be down because of confusion surrounding this issue. But either way, it is down. And that’s why these other Bitcoin stocks are down, as well.

Now what

For funds like Grayscale Bitcoin Trust and Grayscale Digital Large Cap Fund, their values are directly tied to the cryptocurrencies they hold. The former holds only Bitcoin and is therefore 100% tied to Bitcoin. The latter holds Bitcoin, Ether, Bitcoin Cash, Litecoin, and Chainlink. But 65.5% of its holdings are Bitcoin, so it’s still very much tied to this single cryptocurrency. Moreover, alt-coins like these others have historically gone up and down with Bitcoin, so it’s unlikely they’ll rise significantly while Bitcoin is going down.

Turning to Bitcoin mining stocks, production has been increasing for companies like Marathon Digital and Riot Blockchain. For example, Marathon Digital mined just 50 Bitcoins in January but almost 227 Bitcoins in May. But this didn’t just happen — both companies have been purchasing and installing new mining equipment to increase production. The result is more Bitcoin, but a side effect is higher operating costs.

Both Marathon Digital and Riot Blockchain intend to continue installing new mining rigs through 2021 and into 2022 under the assumption that the price of Bitcoin will continue rising. But this is a risk to the business completely outside their control.

We don’t know what the exact breakeven price is for these companies, but if Bitcoin keeps falling at this rate (now down almost 50% from its April high) both companies risk mining Bitcoin at a loss — which obviously wouldn’t be good. 

Therefore, if you’re a long-term investor with either Marathon Digital or Riot Blockchain, it doesn’t really matter how well they’re managed if Bitcoin doesn’t start heading back up. That’s the most important thing to watch going forward.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Bitcoin stocks tumble after authorities recover ransom paid by Colonial Pipeline appeared first on The Motley Fool Australia.

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Jon Quast owns shares of Bitcoin and Ether. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Digital Wine Ventures Ltd (ASX: DW8) share price is rocketing today. At the time of writing, shares in the online alcoholic drink vendor are selling for 9.9 cents apiece, up 6.45%, after opening at a high of 10.5 cents each. By comparison, the All Ordinaries Index (ASX: XAO) is up 0.5%.

The price rise comes after the company released impressive sales figures for May and announced a new deal with Amazon.com, Inc. (NASDAQ: AMZN).

Let’s take a closer look at today’s news.

Why the Digital Wine share price is rising

May sales figures

In a statement to the ASX, Digital Wine Ventures said cases shipped in May were up 619% on the previous year to around 25,200. Shipped cases are also up on the previous month by 9.9%. However, this figure is still slightly lower than its March record of 25,300. The Digital Wine share price crashed on its lower sales in April.

The company also says approximately 11,700 orders were processed in May – up an impressive 23.4% on the previous month. Average cases per order did fall from 2.42 to 2.15.

Amazon deal

The second piece of news out today is a partnership with Amazon.

Digital Wine says it provides wine suppliers using Amazon’s integrated trading, logistics, and payment solutions the ability to make their products available for sale on its Australian marketplace by simply clicking a single checkbox.

WineDepot, a Digital Wine subsidiary, will manage product storage and packing, according to the statement. Amazon’s fulfilment network will then be utilised to deliver the products ordered on Digital Wine’s marketplace to the customer.

The company says it expects to release further details on the partnership soon.

Digital Wine share price snapshot

Over the past 12 months, the Digital Wine share price has increased more than 1,200%. However, it’s down 50% since hitting a record high of 21 cents in mid-April. Last month, Digital Wine announced it would be expanding into the bBuy now, pay later (BNPL) industry.

Given its current valuation, Digital Wine Ventures has a market capitalisation of $179 million.

The post Digital Wine (ASX:DW8) share price jumps on bumper sales and Amazon deal appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Regional Express Holdings Ltd (ASX: REX) share price is in negative territory today. This comes after the regional airline operator advised it has revised its interim guidance for the current financial year.

At the time of writing, Regional Express shares are down 1.59% to $1.235.

Regional Express headwinds

In a statement to the ASX, Regional Express announced it will not meet its previously forecasted guidance given on 10 May 2021. The company earlier noted that it expected to break even for the 2021 financial year.

However, after the latest COVID-19 interstate border restrictions and lockdowns, Regional Express has suffered a loss in potential revenue. Forced flight cancellations to and from Melbourne, in particular, has disrupted the airline’s recovery from the fallout of the pandemic.

This comes at a time when the company introduced new $39 fares between Sydney and Melbourne to challenge its bigger rival, Qantas Airways Limited (ASX: QAN).

As a result, Regional Express is now projecting a full year statutory loss before tax of around $15 million.

The company also said that it will be refunding affected customer tickets, in line with its COVID-19 refund guarantee policy.

Last month, Regional Express noted that overall demand across its business is sitting at 60% from pre-COVID levels. However, some states in Australia are performing better than others, with Queensland and Western Australia taking the lead.

Operations such as the Coffs Harbour and Port Macquarie route commenced in late March this year. Interestingly, these two regional centres account for around 40% of the total number of passengers in Regional Express’ entire network.

Regional Express share price summary

Despite today’s slight fall, over the last 12 months, Regional Express shares have climbed around 10%. Year-to-date share price performance has gone in the opposite direction, down more than 40%.

On valuation grounds, Regional Express has a market capitalisation of roughly $136 million, with approximately 110.1 million shares on issue.

The post Regional Express (ASX:REX) share price edges lower on revised guidance appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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As the world navigates to the post-COVID era, the money has moved from growth to value stocks.

To demonstrate, the S&P/ASX All Technology Index (ASX: XTX) has lost more than 12% off its 52-week high. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has hit new all-time highs in recent weeks, shooting up more than 10% since the start of 2021.

The wisdom seems to be that as the economy picks up after the pandemic malaise, inflation will head upwards. Higher inflation can lead to higher interest rates, which are anathema to growth shares relying on future earnings.

But Montgomery Investments chief investment officer Roger Montgomery rejects the traditional categorisations of ‘value’ and ‘growth’.

“The conventionally accepted method of classifying value and growth stocks is subjective, arbitrary and engineered for convenience,” he said in a company whitepaper.

How ‘value’ and ‘growth’ definitions are flawed

Value and growth classifications are often made on a company’s price-to-earnings (PE) ratio. Sometimes analysts use price-to-sales to better reflect fast-growing businesses that don’t have massive earnings yet.

Growth stocks tend to have high ratios and value shares have low ratios.

REA Group Limited (ASX: REA) is an example of this. The online real estate advertising company’s PE ratio is now more than 158 after the stock price went from under $10 eleven years ago to $166.70 after close of trade Tuesday. 

Even though banking shares have rallied in the past 6 months, a value share like National Australia Bank Ltd (ASX: NAB) is still selling at a PE ratio of just 20.5 at the time of writing.

And the growth story of 2020, electric car maker Tesla Inc (NASDAQ: TSLA) currently trades at a PE ratio of more than 608.

According to Montgomery, this is problematic.

“Classifying growth and value stocks purely on PE ratio or some other market multiple is flawed,” he said.

“Stocks with high PE ratios can be value stocks and stocks with low PE ratios may have them for a very good reason.”

Shares with massive PE ratios can also be ‘cheap’

Forager Funds chief investment officer Steve Johnson last month shared Montgomery’s discomfort about these traditional definitions.

The trouble is price-multiple calculations tell investors nothing about the upcoming potential of a business.

“‘Rocket to the Moon’ trades at 40x earnings, therefore it is expensive: It’s a lazy conclusion,” Johnson posted on Livewire.

“And it can be very wrong.”

Johnson said a business that keeps growing for many years can make current PE ratio judgments look absurd.

It’s yet another investment lesson on the impact of compounding.

“When a company compounds earnings exponentially, the fair value can be a seemingly absurdly high multiple of early-year earnings,” he said.

Cochlear Limited (ASX: COH) is one example Johnson cited, admitting that he dismissed it years ago based on its high PE ratio.

Two decades ago the stock was going for around $35 to $40, meaning a PE ratio of more than 30. According to Johnson, Cochlear has grown 15% per annum since then.

The stock closed Tuesday at $232.75.

“With the benefit of hindsight, you could have paid 150 times earnings and have still generated a 10% annual return (including dividends).”

The post Why ‘value’ and ‘growth’ share categories are meaningless appeared first on The Motley Fool Australia.

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Tony Yoo doesn’t own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Cochlear Ltd. and Tesla. The Motley Fool Australia has recommended Cochlear Ltd. and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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