Rackspace Hosting (RAX) is a place companies store data in the cloud. The company is one of the fastest growing around, but even after the stock market’s fall during May, RAX is still too high.
One Year Chart
The 64 P/E is just way too much. That’s a steap price for investors to pay.
Profit growth the past four quarters (bottom left) has been stellar. This company is growing rapidly — and has earned a fat P/E — just not 64.
Do notice the Annual EPS Growth on the right. Profits have grown from $0.19 in 2008 to an estimated $0.80 this year. Serious growth. Check the ten-year chart in the link below to see why I like this stock.
Fair Value
I think RAX is worth 50 times earnings, that means a dip to $40 would make the stock attractive.
Still, 50 times earnings is a lot, and if this market keeps going down that support level around $35 looks safer to buy in at.
