**There is no universal maximum “healthy” P/E.** A stock is overvalued when its price exceeds what its future cash flows reasonably justify. P/E is a useful clue, but it cannot establish that by itself.

The reason is that P/E divides price by **current earnings**, while investors are paying for **future earnings**. A company earning almost nothing today can have an enormous P/E even if its future prospects justify its price. As current earnings approach zero, P/E can become arbitrarily large.

That doesn’t make growth an unlimited excuse. A reasonable valuation depends on how fast earnings grow, how long that growth lasts, the investment needed to achieve it, and the risk that it fails. These are the fundamentals underlying P/E valuation. [NYU Stern’s explanation](https://pages.stern.nyu.edu/~adamodar/New_Home_Page/invfables/peratio.htm)

To put **200× earnings** into perspective, suppose:

- You buy at a P/E of 200.
- In five years, the company trades at a P/E of 20.
- You receive no dividends.

The earnings growth needed would be:

| Your investment outcome after five years | Required increase in earnings per share | Annual earnings growth |
|---|---:|---:|
| Your share price stays unchanged | 10× | About 58% |
| You earn 10% annually | About 16.1× | About 74% |

Those figures follow from:

\[
\frac{\text{Future price}}{\text{Current price}}
=
\frac{\text{Future P/E}}{\text{Current P/E}}
\times
\frac{\text{Future EPS}}{\text{Current EPS}}
\]

**The future P/E of 20 is an assumption**, not a universal fair value. But the calculation shows why a very high starting multiple can produce disappointing returns even when the business grows impressively.

A high P/E can also reflect temporarily depressed earnings—for example, a one-time expense or unusually heavy spending. Conversely, a low P/E can reflect temporarily inflated earnings, particularly at the peak of a cyclical industry. You therefore need to assess sustainable earnings, rather than mechanically comparing reported multiples.

Taking your Netflix figure of 200 as an illustration—I haven’t established that it is its current multiple—I would regard it as requiring an exceptionally strong justification. Check the quote’s date and whether it uses trailing earnings or forecast earnings; those can produce substantially different ratios.

The useful question is: **“What earnings growth must happen for me to earn an acceptable return at this price, and how plausible is that?”** That gives you a defensible limit for a particular stock, whereas a universal P/E ceiling does not.