Why Peloton Stock Isn't as Outrageously Pricey as It Might Seem

Earlier this month, Peloton Interactive (NASDAQ: PTON), the connected home-fitness leader, reported strong fiscal first-quarter 2021 results (for the period ended Sept. 30). Revenue soared 232% year over year to $757.9 million. Net income was $69.3 million, or $0.20 per share, versus a net loss of $49.8 million, or $1.29 per share, in the year-ago period.

Peloton's results have gotten a huge boost from the COVID-19 pandemic, which has driven more people to exercise in the safety of their homes. Combine this tailwind with the company's value proposition that was already attractive before the pandemic -- making exercising more enjoyable for many people -- and it's not surprising that shares have rocketed. In 2020, Peloton stock is up 284% through Nov. 27, compared with the S&P 500 index's 14.5% return.

As you'd expect for such a fast-growing company, Peloton's stock is highly valued. However, the good news is that it's not nearly as outrageously pricey from a valuation standpoint as many investors probably believe. This is because many investors likely consider just the stock's price-to-earnings (P/E) ratio, which has major limitations as a stand-alone valuation metric.

Source Fool.com