Recently, when I’ve been looking into growth stocks, I keep coming across this idea: valuations are already very high, and the market has priced in several years of perfect performance. So if results even slightly miss expectations, the stock could get re rated and see a sharp pullback.
I understand this logic, and I’ve definitely seen plenty of examples where that happens. When reality doesn’t meet expectations, the stock price pulls back pretty noticeably.
But when I look back at companies that eventually grew into major businesses, it doesn’t seem that simple. Many of them always looked “expensive” during their rise. Even as valuation multiples compressed over time, their fundamentals kept getting stronger customer growth, improving pricing power, expanding margins, and continued business expansion. The stock might go through periods of volatility or pullbacks, but over the long term, the trend seems more driven by execution than by valuation compression alone.
What’s making me rethink things now is whether constantly waiting for a “cheap” entry is basically missing the early stages of a move. If a company is in a rapid growth phase and continuously proving itself, the market usually doesn’t give you a comfortable low valuation entry point.
So it really becomes a tradeoff: either you enter earlier at higher valuations and accept volatility and uncertainty, or you wait until everything looks reasonable and realize most of the upside is already gone.
I’m not saying valuation doesn’t matter at all, but for some companies that can compound over the long term, time in the market might matter more than trying to find the perfect entry point.
Curious how you guys think about this. Do you prefer waiting for valuations to come down before buying, or are you willing to get in early and ride through the volatility?