Hi Victor,
I kind of forgot what you say regarding Tech stock valuations.
Do we use P/E ratios? I think I remember in general you mention we can do that
Are there any other ratio we can use to price a tech stock?
Thank you!
Hi Theodore,
In general, PE valuation should be the right model for tech stocks unless they are losing money. Then PE ratio is unable to use.
In that case, may I suggest Price-to-Sales?
Yes Price to Sales are usually for those lost making companies.
Thanks both
Victor, may I hijack a bit and wonder how do you determine whether PS ratios are reasonable? I see many Saas companies that look good yet loss making.
You can plot out the price to sales chart which is similar to PE chart. The key is increasing revenue that comes with potential profitability
I was thinking most of these aren’t really proven but they command insane valuations
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