No. of Recommendations: 5
The problem with 500% growth rates is than you soon run out of new customers

0 1
1 5
2 25
3 125
4 625
5 3,125
6 15,625
7 78,125
8 390,625
9 1,953,125
10 9,765,625
11 48,828,125
12 244,140,625
13 1,220,703,125
14 6,103,515,625 <- the world's population?
15 30,517,578,125

In practice this means a shrinking growth rate that shrinks multipliers like P/S and P/E. The Greeks wrote a tragedy about this, Icarus.

Denny Schlesinger

Yes, it's a problem with any growth company.

Looking at the numbers, Luckin seems too good to believe right now.

It had over $200 million in revenues this last quarter. It has a market cap of only $1.1 billion and enterprise value of only $377 million which means it effectively has an enterprise value of less than 0.5 times forward sales. It has only 30 million customers in a country of 1.4 billion.

So it's valuation seems quite low. SBUX is trading at a market cap of about 4 times sales by comparison.

And has a lot of room to grow. It could easily grow it's customer base ten fold.

I don't think it has a moat. But SBUX doesn't really have a moat either. It has a great brand and continues to grow despite its massive size.

Might be worth a small bet.

Not too much because of the lack of moat and the too-good-to-be-true numbers for a company in China, lol.

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