Standard valuation metrics like the price-to-earnings (P/E) ratio and the price-to-free-cash-flow (P/FCF) ratio are useful when the future of a company is at least somewhat predictable. How much free cash flow will Procter & Gamble produce 10 years from now? Using the current value and the historical growth rate, you can come up with a reasonable estimate that will probably be in the ballpark.

Meta Platforms (NASDAQ: META), the company behind Facebook, Instagram, and the money pit it calls the metaverse, does not fall into this category. The range of potential outcomes is so vast that valuation metrics are completely meaningless. Investing in the company is a pure leap of faith.

If you looked at Meta stock last year, you might have been fooled into thinking it was incredibly cheap despite a trillion-dollar valuation. Revenue soared 37% in 2021 to $118 billion, and both net income and free cash flow were right around $39 billion. For a dominant company growing that quickly, a P/E ratio of 25 probably seemed pessimistic.

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Source Fool.com