There's another possible interpretation, ST, using a more robust 10 year average.
From 1992 -> 1998, AMAT, NVLS, and KLAC maintained p/s ratios between 2 and 4. Generally speaking, these stocks would peak at a p/s of 3.5 - 4 and would bottom at 1.5 - 2. However, starting in 1999, these large-cap stocks took on bubble-like valuations, shifting their range from 2 - 4 to 4 - 8. While we all can agree the bubble has burst big time, AMAT, NVLS, and KLAC maintain their bubble-like valuations.
None of this applies to KLIC: the stock has maintained a p/s between 0.5 and 2 for a decade and it continues to reside in that range.
Based on this analysis, AMAT, KLAC, and NVLS may be headed for a ~50% fall to reach even the higher range of the mean of non-bubble valuations. KLIC, on the other hand, is well within it normal 'contraction' range and thus may be poised to rally from these levels.
Another perspective: if the equipment stocks did indeed make a bottom in December, 2000, KLIC's p/s at the time was completely consistent with its historical bottom whereas the p/s of KLAC, NVLS, and AMAT was 1.5 to 5+ times the average bottom p/s level reached during the previous 8 years.
To state the obvious once again: the large-cap stocks are completely out of sync with the bubble correction that has occurred in the rest of the market. This does not necessarily mean the situation will be corrected any time soon. But the valuation discrepancy is a fact...and may be a disaster waiting to happen for the large cap equipment stocks. |
