Matthew Green

Well this bodes well for future events.

James Rees

Thanks for the article Phillip, but I suspect the use of statistics lacks appropriate context. The IT Index 10 years ago was made up of 79% CPU, 13% IRE and 7% CAR. Even 5 years ago, it was made up of 56% CPU, 21% CAR, 14% IRE and 10% TNE. Of course the earnings and PE of the index will change materially when the index construction changes so dramatically. CPU's earnings have grown at 7% p.a. over the last 5 years. ALU at 39% p.a., APX at 39% p.a. (over 4 full years since listing), TNE at 13% p.a. The other current constituents of the IT index are pre-profitability (but businesses like XRO have grown revenue at over 40% for over 5 years) or have only been listed a couple of years. What PE should a business like NXT trade on? Afterpay? Xero? Megaport? I'm not actually a believer in many of the constituents of the IT index, but I'm questioning the context of the statistics you're presenting and your method of analysis. If you're simply looking at the PE and earnings growth of an index with the characteristics of the IT index (such change within the index constituents and the early stage nature of the businesses) then I suspect the conclusions drawn will be quite unreliable.

Rudi Filapek-Vandyck

James Rees: I could not agree more with you, even if I tried. The above is simply yet another example of Lies, Damned Lies, and Statistics. It's deeply flawed analysis because it treats the stats in a non-sophisticated manner. Lazard is a value investor. This type of analysis typically suits value investors as it continues the mantra of "we are sane, while the market is crazy" (justifying funds underperformance to clients). You are absolutely correct in the points you are making. This idea that investors are paying ever higher prices for companies whose growth is evaporating, a spiel occasionally also applied on the local healthcare sector, is a blatant myth. It needs to be exposed for what it really is: a sorry excuse for deeply biased and flawed analysis.