Thanks! Here is one more big post...The numbers are again not quite lined up, but
I left them in here anyway. The names are important though. Also, this was feb 5th and I would
love to update these numbers, but don't have time. I have a feeling that the numbers
here are actually WORSE than 2/5/2001 !!!! Well, anyway, here are the rip off companies! I am putting
the under 2 million rev ones last since they are not as important and I don't think anyone here
trades them. The article is called POCKETS OF EXCESS:
2/5/2001 -- Paying For Continued Growth: High Price/Sales Ratios On Big Companies
Two Ways To Look At It
Overvaluation in the stock market can be looked at two ways:
Paying in advance for growth that is unproven
Paying for growth that has already occurred, on the theory that it will continue
The first occurs when investors support a large market capitalization with little proven revenue behind it. The second occurs when investors support a large market
capitalization on large revenues.
Both can be best measured using the price/sales ratio.
Big company overvaluation was rampant during 1998 and 1999. This is the idea that companies, with proven high growth rates, will be able to continue their high
growth rates, even after they have become big. And therefore, a high price/sales ratio is justified.
Amazon.com (AMZN) was probably the most dramatic example of this idea, but there were plenty of others. Anything associated with the internet could have any
price/sales metric, because no one knew who big the internet was going to be. At least, that was the argument.
A high price/sales ratio implies that the company still has strong, powerful growth still ahead of it. Mature companies in mature industries, with flat growth, often sell
for one times revenues (a P/S of 1), provided they have strong balance sheets and pay more in dividends than bonds do. Companies with good growth in industries
growing with the pace of the overall economy often sell for 2 or 3 times revenues.
But technology companies sometimes sell for 50 times revenues or more, on the assumption that their growth will be exponential. There are certainly examples of
exponential growth in the past.
But when a company has already achieved substantial size, how realistic is it to continue growing at tremendous rates?
We ran two stock screens searching for evidence that the "big can grow as fast as small" mentality is still out there.
The first looked for companies with a price/sales ratio over 50, with revenues greater than $50 million. Revenues of $50 million is still pretty small, by most standards.
But a price/sales ratio of 50 implies tremendous growth rates. A single slip up by any of these companies, and their price will collapse even from today's levels.
These are high valuations.
Stocks with Price/Sales over 50 and Revenues over $50 million.
Ticker
Name
TTM Price
TTM
Market
Long Term
To Sales
Sales $
Capitalization
Grth Rate
Per Share
Mean
ARMHY
ARM Holdings plc
50.93
148.067
6973.67
32
AUTN
Autonomy Corporation plc
72.86
51.158
3631.815
50
BRCD
Brocade Communications
61.08
329.045
18558.861
53.92
CHKP
Check Point Software Tech
58.75
425.283
21816.756
44.15
IDPH
IDEC Pharmaceuticals Corp
58.94
154.682
7810.438
41.92
JNPR
Juniper Networks, Inc.
52.17
673.501
31974.279
58.15
PDLI
Protein Design Labs, Inc.
51.27
53.517
2896.156
20
RMBS
Rambus, Inc.
54.57
95.079
4790.609
86
SONS
Sonus Networks, Inc.
72.26
51.771
7194.839
50
We also looked for examples of high valuation in even bigger companies, those with more than $500 million in revenues. When a company reaches sales of this level,
it is in the top 20% of all companies. But a price/sales ratio of greater than 20 implies that it will continue to grow at exceedingly high rates. Unless the stock is
already showing a great earnings model (only Liberty Media Group meets this on this list.), the high valuation is entirely based on continued growth expectations. But
at $500 million, a growth rate of 50% implies that the company will reach $4 billion in sales in just five years. Revenues of $4 billion would put these companies in the
top 5% of all companies.
Click here for the full list of 13 stocks with Price/Sales ratios over 20 and revenues greater than $500 million. The list includes many popular stocks, including Veritas
(VRTS), Qualcomm (QCOM), Juniper (JNPR), Broadcom (BRCM) and Vitesse (VTSS).
Stocks with Price/Sales Over 20 and Revenue Over $500 Million.
Ticker
Name
TTM Price
TTM
P/E
Long Term
To Sales
Sales $
Excluding
Grth Rate
Per Share
Xord Items
Mean
AMGN
Amgen, Inc.
20.9
3,629.40
66.61
18.3
BEAS
BEA Systems, Inc.
32.71
712.89
NM
45.63
BRCM
Broadcom Corporation
21.04
1,132.07
NM
50.36
CIEN
CIENA Corporation
29.17
858.75
307.9
43.5
GMST
Gemstar-TV Guide Int'l
26.59
521.10
2864
42.5
JNPR
Juniper Networks, Inc.
52.17
673.50
237.47
58.15
LMG.A
Liberty Media Group
28.96
1,229.00
14.09
23.33
LLTC
Linear Technology Corp.
21.69
886.68
50.48
26.07
QCOM
QUALCOMM, Inc.
25.19
2,760.73
629.08
34.08
SDLI
SDL, Inc.
30.31
504.84
NM
48.8
VRTS
Veritas Software Corp.
28.83
1,207.33
NM
45.02
VTSS
Vitesse Semiconductor
23.97
517.54
383.57
41.83
WIT
Wipro Ltd.
23.05
614.01
121.22
58.5
=================================================================================
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Ok, here are the smaller companies:
Paying For Growth In Advance: Speculation on Zero Revenues
Speculation is placing a large value on a company that hasn't proven its basic concept yet.
There is nothing wrong with speculation, but investments in unproven concepts more rightly belong in the private markets, not the public markets. To find
speculative companies, we ran a stock screen searching for companies with market capitalizations over $200 million, but with revenues of less than $2 million. We
excluded biotech companies because they truly deserve to be valued as "lottery tickets."
This stock screen turned up 21 companies. That may not seem like many, but it is an indication that the market is still willing to fund companies in a "venture"
environment.
These are high prices for unproven stocks. They should really still be in the private sector where they can prove their concepts prior to coming public. While the
public was burned for becoming venture capitalists with internet stocks, it is clear that there are still some people out there willing to take flyers on unproven
concepts.
Stocks with More Than $200 Million in Market Capitalization, But Less Than $2 Million in Revenue
Ticker
Name
Market
TTM
Long Term
Capitalization
Sales $
Grth Rate
Mean
ACRI
Acacia Research Corp.
283.375
0.063
NA
BCON
Beacon Power Corp.
359.165
0.203
25
CDDD
Constellation 3D, Inc.
432.823
0
NA
EDIG
e.Digital Corporation
294.304
1.524
NA
EDEN
EDEN Bioscience Corp.
686.575
0.655
30
FLNT
FuelNation, Inc.
290.828
0
NA
GOLX
Global Online India, Inc.
325.033
0.101
NA
HQH
H&Q Healthcare Investors
243.509
0.644
NA
ISCO
Illinois Superconductor
216.515
0.662
NA
ILMN
Illumina, Inc.
582.887
1.31
NA
LSATA
Liberty Satellite & Tech.
315.729
0.34
NA
MDTL
Medis Technologies Ltd.
376.594
0
NA
MCEL
Millennium Cell Inc.
319.224
0
NA
PRTN
Proton Energy Systems
475.554
1.391
NA
PYR
PYR Energy
209.874
0.219
NA
REFR
Research Frontiers, Inc.
238.817
0.322
NA
SIRI
Sirius Satellite Radio
1262.97
0
NA
TRCD
Tricord Systems, Inc.
352.59
0
NA
WAVX
Wave Systems Corp.
425.869
0.278
NA
XMSR
XM Satellite Radio Hold.
942.276
0
NA
ZIXI
ZixIt Corporation
215.631
0.386
NA |
