RE:RE:RE:YouTube Video Breaking down value of $DCMPrice-to-sales is a lousy valuation tool because some sales are more profitable than others.
nozzpack wrote: "But as an analyst/PM I just have to say that using multiples of sales as a way to determine 'intrinsic value' is borderline criminal. "
While your statement has some merit, it does not follow through that price to sales as a valuator is criminal.
Take for example, two choices to invest in, both with the same gross margin, one with $250 m in sales and the other with $25 million.
Obviously, I would take the former, as cash flows would be 10 times greater in the former.
In additon, large revenues are usually associated with diversified revenue streams as is the case with DCM
So, price to sales does have valuation pertinence but should be combined with several others like EV to Cash flow, Ebitda, PEG , P/E etc in a multiplicative manner for a composite index whose interpretation has no single rule.
As for not being able to predict the furture, that applies to all equity investments.
And you say you are an analyst ?
Wow...