Biotech Values

[biomaven0]

MRK's P/E ratio, based on 2013 EPS guidance, is about 13x—not exactly my definition of a bubble valuation.

Particularly in the context of long-term interest rates under 3%. MRK's earnings yield is around 8% - or more than double the risk-free rate. That's a long way from bubble territory.

One of the biggest misconceptions an investor can have is to look at absolute P/E's in isolation from the risk-free long-term interest rate. I see this all the time from journalists and commentator types that should definitely know better.

Peter