If the fundamentalists, and here I mean it in the intolerant way, dislike multiple expansion, they get downright furious when we value a company away from earnings entirely.
Some can accept the notion that we are going to value companies on an enterprise basis. If a company is motivated to change itself, restructure or buy some one, once that conviction has set in that some action will occur, some fundamentalists might accept this as a reason to buy. But many won't. They want to come back to that normative price-to-earnings model at all costs, including the cost of their own performances. They don't even want to do that sum-of-the-parts analysis.
But what really drives them crazy is when you decide to leave the realm of earnings and enterprise value altogether and you decide to grade an institution on its ability to produce ever-growing sales or, perhaps, a stable of new drugs that could be worth money many years down the road.
These are the current battlegrounds and it is where all the heat and hate comes takes place. Take Salesforce.com (CRM), Yelp (YELP), Workday (WDAY), Cornerstone OnDemand (CSOD), Concur Technologies (CNQR) and many of the other software-as-a-service or cloud and social and mobile plays. None of these are valued on price-to-earnings multiples. None. They are all being graded on sales growth. As long as sales growth momentum stays strong there are funds that will pay up for that growth. If the indignant ones could pass a law saying that's not fair, they would. But they can't.
Given the endless runs these stocks have had, you would think that at some point there could be some sort of reformation or at least a rapprochement, but there isn't. So, these stocks are considered apostates, agnostic to the current dogma.
But now let's take a step further and go into atheism, or at least what the righteous believe is atheism, which is to value a stock on its opportunity.
Companies like Netflix (NFLX), Tesla (TSLA) and SolarCity (SCTY) are valued for what can happen. They are valued on dreams and the righteous think that's just witchcraft and they want to burn the CEOs and their shareholder acolytes at the stake. These are Salem Stocks!
Along the way, there are some outliers. The righteous ones, for example, thought that the agnostics, those who accept revenue or earnings propellants, were paying too much for the sales of Facebook (FB) and Google (GOOG), when it turns out they were earning a huge amount of money. An expensive and unattractive duckling turns into a cheap swan, at least for a moment, like Facebook at $25 going to $70. And the righteous accept that some companies are willing to pay an absurd amount of money for other companies. That's just a fact of life.
But ultimately, when you hear the jeremiads about imminent crashes and absurd overvaluations, remember that from time immemorial there has been more than one way to value a stock or accept, even grudgingly why it can be propelled higher beyond just better-than-expected earnings. Once you are liberated, once you are free of the dogma you can see why the market isn't crazy, and no one -- okay maybe just a couple -- should be burned at the stake.