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Technology Stocks : eToys Inc. (ETYS)
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To: FirstDiogenes who wrote (617)8/11/1999 8:16:00 AM
From: Rajiv  Read Replies (2) of 1330
 
I am not a big fan of P/S ratios. The ratio is irrelevant if other parameters like gross margins, revenue growth rate, etc. are not considered in the analysis. However, I am periodically told by longs (on threads of stocks which I am short) that the internet is the future and we must look at P/S.

For ETYS, the extreme valuation is obvious. Last Quarter ONSL had revenues of 81 MM but it trades at a market cap of around 270 million. ETYS had revenues of 8 MM but trades at a market cap of more than 3 billion. I believe that this overvaluation will be corrected in the future (hence my position in this stock)

Internet companies (e-commerce) typically hit the peak revenue growth rate within the first 2 years in business. If ETYS follows this pattern, it will hit its peak revenue growth rate in the next few quarters.

Regards,
Rajiv
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