Forum Topics Valuations non profitable companies
Solvetheriddle
2 years ago

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I thought this was an interesting chart from Market Ear and GS. My takeaways are that it gives us some idea where pricing has been in an area that I find difficult to get a feel on ballpark valuations, since I mainly swim in the bigger end of town. However relevant for where much of the SM audience resides. What I see is where valuations can go under extreme stress, circa 2x sales in GFC and Euro crisis, about 2.5x sales under high stress eg 2018. Still some reasonable downside from here, possible if things tighten further.

Finally timing is critical, those clever enough or fortunate enough to get in around 2016/7 still ahead, (get sales growth + rerate) those entering in last couple of years, well a lot harder.


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Strawman
2 years ago

very interesting chart @Solvetheriddle

I'll admit that multiple expansion did a lot of the heavy lifting for me between 2018-2021 -- but it's not something you want to rely on.

Not sure what this chart would look like for ASX companies, but pretty similar I imagine.

Personally i wouldn't use it for timing purposes, but it does give you some solace that the worst could be over for these kind of stocks (assuming there's a decent business underpinning them)

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Byrnesty
2 years ago

Great chart @Solvetheriddle

I thought it would be interesting to compare this chart with the US 10 Year Bond Yield chart over the same period.


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aa568c637e2e7cbd961bdca20a156dbbcd0660.png

 

Each time that the US 10 Year Bond Rate has been at 3% since 2008 the P/S ratio has been very close to 2.5 within a similar timeframe.

In 2008/2009 when the US 10 Year Bond Rate was close to 5% the P/S ratio was 1.5 to 2. We well may be heading there again suggesting some more pain for tech portfolios to come.

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GazD
2 years ago

This is great! An excuse for my pitiful performance over the last 2 years!

funny this is I was out there saying I saw PE compression coming and I still held everything and now my portfolio is UNDERWATER! Ah well

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