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To: Out_of_the_Trap who wrote (6477)	3/12/1999 5:16:00 AM
From: Brian K Crawford	Respond to of 41369

herring.com Interesting article on net stock valuations. Makes a good case for "Price to Gross profit" being a better measure than "Price to sales". Writer compares YHOO, AOL, and AMZN. Clips: "What's the best way to compare valuations of Internet stocks? One measure has gained more or less universal acceptance: the ratio of stock price to annualized sales, or revenue per share. The popularity of the PSR (price/sales ratio) reflects investor belief that it's more important for Internet companies to grow revenue than profit, and that revenue is proxy for marketplace acceptance and market share." "Yahoo trades at 90 times sales. But few would say that Amazon, which trades at 30 times sales, is only one-third as richly valued as Yahoo. " "Retailers' revenues are different from those of service companies." [Due to lower gross margins] "That perspective makes it clear why Yahoo's PSR is three times that of Amazon. Though Amazon's $253 million sales in the last quarter were three times Yahoo's $76 million, gross profit was much closer -- $53 million vs. $69 million. From that point on, the types of activities and expenses of Amazon and Yahoo are nearly identical: marketing, product development, and administration." Brian