Quick thought experiment. I offer to sell you my restaurant for $109,000. “How much is it earning?”, you may ask. “Well, nothing this year. But next year, if everything goes right, it could make $1,000.”
Excited? Eager to pony up your hard-earned money for my investment gem of a restaurant? After taking three decimals off, that’s the deal you could got by buying a share of Zillow (NASDAQ:Z) for $109. EPS estimates sit at $0.22 for this year and $0.30 for next year. Its current return on investment (ROI) is a solid 0%.
That’s not bad for a money market fund these days, but it stinks for a stock. The S&P 500 is selling at a 4.4% ROI. Magic Software Enterprises (NASDAQ:MGIC), which I just wrote up for Seeking Alpha last week, is selling at a 14% ROI.
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