What P/S level does AMAT deserve at this point in the cycle?
That depends on what part of the cycle we are in, now. IMO, we are currently at the flat bottom of a U-shaped trough, and the upturn in the cycle must begin sometime in 2002 (assuming an economic recovery, and no more "exogenous shocks", and not too many more Enrons and Argentinas).
At the 9/01 bottom, I calculated a P/S of:
2.6 = 27/(8.90/.854).
Since then, the stock price is 2/3 higher (27 to 45), the trailing 12M revenues have gone from 8.9B to 5.5B, (and will certainly go lower still, before they trough). You can do the math, and it ain't pretty.
For comparison, the 3 previous troughs happened at a P/S of 2.2 (1998), 0.9, and 0.9 If we've seen the trough for this cycle, it will be the highest trough valuation, ever. |
