Theodore Tan asked 2 years ago
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!
Victor Chng answered 2 years ago
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.
Jieren Zheng
replied 2 years ago In that case, may I suggest Price-to-Sales?
Victor Chng
replied 2 years ago Yes Price to Sales are usually for those lost making companies.
Theodore Tan
replied 2 years ago Thanks both
Jieren Zheng
replied 2 years ago 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.
Victor Chng
replied 2 years ago 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
Jieren Zheng
replied 2 years ago I was thinking most of these aren’t really proven but they command insane valuations
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