Dan, you can make any company look good if you selectively post numbers. Here's a tip for future analysis. Companies which don't make money tend to have lower P/S and P/B ratios then companies which do, at least during rational market periods. How about doing a comparison of GUMM's profit margins to the overall total. That may put things in perspective.
But, just out of curiousity, I decided to do a little stock screen over at MSN. They break down the sectors a little more narrowly than the broad category you gave, which makes for a better comparison. (I'm assuming that GUMM has no plans to manufacture biologically engineered gum, for example.) I chose the "Drug Related Products" category as the best match for GUMM. Companies included: Herbalife, NBTY, Twinlab, Carter-Wallace, etc. When I screened for companies which had greater P/S and P/B vs. companies which had lower P/S and P/B, the results were 17 companies which were cheaper by this measure and 4 companies which were more expensive. BTW, GUMM only beat one of the companies on profit margin.
Of course, if you want to compare GUMM's P/S and P/B to Merck and Pfizer and conclude from the comparison that GUMM is cheap, be my guest. Just don't call it analysis. |
