Price to sales:
While it would be nice to come up with some simple measure
to judge the relative valuation of an individual stock, I have
found any single statistic, or any combination of these
stats, to be highly unreliable and deceptive.
For example, if one prefers P/S to PE during this recovery
period, then the data below should be quite helpful. Choosing
a stock with a P/S less than ~2.5 should leave an investor
comfortable that the valuation of their selection would
protect them, in general, form significant downside risk.
Similarly, the investor would feel comfortable avoiding
stocks with a p/s over 5.0, a standard that currently
includes AMAT, KLAC, and NVLS, since such valuations
are already rich.
===================
Stock P/S CAP
----------------------
1. WFR 0.5 .38
2. SFAM 0.6 .12
3. TGAL 0.9 .02
4. MTSN 1.0 .25
5. ATRM 1.1 .03
6. SMTL 1.4 .31
7. REAL 1.5 .02
8. FSII 1.6 .27
9. GGNS 1.6 .54
10. ASMI 1.8 1.2
11. EMKR 1.9 .34
12. KLIC 1.9 .96
13. VECO 2.0 .87
14. ADEX 2.2 .21
15. ASYT 2.5 .66
16. LRCX 2.5 3.6
17. DPMI 2.6 .96
18. PLAB 2.6 .97
19. PRIA 2.8 .67
20. BRKS 3.0 1.0
21. UTEK 3.5 .46
22. EGLS 4.3 .37
23. ATMI 4.4 .93
24. COHU 4.4 .56
25. HELX 4.6 .54
26. TER 4.6 6.7
27. NANO 4.7 .23
28. CREE 5.6 1.0
29. CYMI 5.6 1.5
30. ASML 5.7 11.4
31. NVLS 5.7 7.7
32. KLAC 5.8 12.3
33. CMOS 6.3 1.3
34. LTXX 6.7 1.3
35. AMAT 7.1 42.5
36. PHTN 13.8 .86
37. IBIS 14.0 .10
===================
Averages (+/- standard error):
P/S = 3.90 (+/- 0.5)
CAP = 2.79 (+/- 1.21)
BTW, there is a small, positive correlation (r = .25)
between p/s and market cap. While this relationship is
insignificant, there is an unmistakable trend:
Here is the P/S data divided in quartiles showing the average
market cap (+/- standard error) of the stocks in that quartile.
1-9: .220 (+/- 0.06)
10-18: 1.09 (+/- 0.33)
19-27: 1.27 (+/- 0.66)
28-37: 8.00 (+/- 4.1) [Avg. = 4.16 excluding AMAT]
These data strongly suggest that the p/s is distorted and
skewed by market cap. I seriously doubt AMAT investors,
for example, would be moved one micron by the high p/s
valuation associated with their stock. In fact, the high p/s
would most likely be presented as supporting evidence for
the incredibly promising future for their company.
It's the usual statistics thing: everyone twists data to
their advantage.
I've been investing in this sector through three full cycles
now. There is rarely, if ever, useful information to be
gained from this sort of valuation-based statistical
analysis.
[All data gathered from Yahoo this morning] |
