Yeah, I see your point. But as investors we all have a different...

Yeah, I see your point.

But as investors we all have a different risk tolerance.

For some, while your analysis seems ok, we need to be mindful that this is a small cap technology stock under going rapid growth in a market that have limited competition, and also operating in an industry that is also rapidly growing.

The perfect storm of forces that Nearmap is currently finding itself in is not something an analyst can just sit down and accurately forecast (either based on past trends or simple multiple growth projections).

Back in December 2013, I used a similar analysis on QANTAS, back then QAN was hundreds of millions in the RED, as its sp dipped below $1, and with a strong downward trend and with no profits in sight there was no reason to purchase the stock at all. But in hindsight, trends, guidance, and profits all seem to play a lesser role to the believe that management can indeed turn the company around!

These days, investors do not have to look very hard to find many technology stocks having either a very high PE (or even a negative PE) and yet their sp continue to grow & grow.

http://www.nasdaq.com/symbol/tsla/pe-ratio

In the US, Tesla Inc is currently trading at over $300 per share and yet its 2016 PE was -69.17, its 2017 & 2018 PE is estimated to be -48.38, and -427.39 respectively. And with no profits in sight, the stock should be worthless, but with its dominant & disruptive IP spreaded across so many industries, when Tesla does turn around (approx in 2019), its PE will be a staggering 83.49.

The conclusion an investor can draw in the above example is that unlike stable traditional businesses (eg Banks, Retailers, & Utilities), disruptive growth technology stocks cannot be purely evaluated by PE alone because there is really no reliable benchmark that can determine whether a PE of 30, 50, 80, or even 100 is expensive at a particular stage of its growth cycle.

In any case, regardless of the absolute level of PE, a simple fact remains; a company undergoing continuous growth will in the long term have a share price that constantly appreciates in value.