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Subject:  Re: How long do P/S last? Date:  12/7/2018  7:37 PM
Author:  Texmex Number:  106391 of 114450

Ok, market cap to TAM is a key metric. But valuations do matter IMO and markets have gone through extended periods of low or high stock valuations. In the other thread I asked something along the following lines:

What has been the historically average P/S for a tech company growing at 50%+/y with $100M+ in annual revenue? How long does it typically maintain that P/S?

Why is this of interest? Because huge TAM, high growth rates are not unique to our companies. Many companies have experienced similar combinations in the past. If the answer to the above question is a typical P/S of 10 is the norm for such a growing company then the current valuations are stretched (perhaps due to a late stage bull market) and we may return to the historical average in the near term.

BTW MA had a P/S of 6-10 between 2011-16. But is now at 15. MA like FB has had ~40% net margins supporting its high P/S.
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