How SIRRIPA Addresses the Irrelevance of the P/E Ratio in Sectoral Comparison and Reveals Hidden Market Rationality in Equity Valuation —The Cases of Palantir, NVIDIA, and Micron Technology

Abstract

Traditional valuation metrics such as the Price-to-Earnings (P/E) ratio are widely used but often misleading when comparing companies within the same sector. This paper demonstrates the irrelevance of the P/E ratio in such cross-company analyses by introducing a more comprehensive framework based on the Potential Payback Period (PPP) and its derivative, the Stock Internal Rate of Return Including Price Appreciation (SIRRIPA). Using the cases of Palantir Technologies, NVIDIA, and Micron Technology as of September 26, 2025, this study shows that while their P/E ratios vary by a factor of nearly 30, their SIRRIPA values converge within a narrow range (5.8% - 7.4%), consistent with long-term equilibrium returns observed between stocks and bonds. This convergence reveals a hidden market rationality: once growth, discount rate, and risk are accounted for, companies in the same sector exhibit similar intrinsic, risk-adjusted returns. The analysis is further vindicated by market performance over the past year, during which all three stocks experienced substantial price increases broadly aligned with their previously estimated SIRRIPA-based intrinsic returns. The paper also highlights the plateau effect, where extremely high P/E ratios cease to influence implied returns, as illustrated by Palantir. Furthermore, it emphasizes the sensitivity of both PPP and SIRRIPA to earnings growth projections, underscoring the need for scenario analysis in valuation. Ultimately, SIRRIPA serves as the equity equivalent of a bond’s Yield to Maturity (YTM)—a universal, yield-based metric that restores rational comparability among stocks and bridges the analytical gap between equity and fixed-income valuation.