Happy New Years! Could you kindly explain your thought process or what you look at when you evaluate if a company is too expensive or not. (Maybe a video?). Are you mostly looking at price-to-sales? Does EPS or forward EPS factor in? I think in your recent IPO video, you stated that you thought $Bill was on the expensive side, i think in relation to P/S. I think $bill has about a 8 p/s, while amd has around a 10, and crwd is showing 20 (according to finviz). Appreciate it -- trying to understand from someone with decades of experience how they evaluate a company in this sense.
This is a great question and I will create a video to explain this topic to the best of my abilities. Yes, earnings is a major part of the criteria when trying to assess a "position" stock in your portfolio. If you are just day/swing trading based on technicals then the earnings do not matter as much.
Also, we must evaluate stocks within their own peer groups. How expensive/inexpensive are they in relation to their peers. For instance the footwear group does not get awarded much of a multiple as that business is finicky and consumers change often. The cybersecurity group (you mentioned CRWD) gets a rich multiple as they are growing quickly and deemed a "necessity" in the enterprise business space. Therefore, we cannot compare a Skechers with Crowdstrike. We need to compare Skechers with ONON and DECK and CRWD with PANW FTNT ZS.
The interest rates are a major factor when considering an entry in a high growth/high valuation stock. In 2022/2023 we saw interest rates rise and their multiples contracted. In 2024, we are going to start to see the interest rates fall and the multiples expand (they already have started) and that is great for the high valuation stocks.
If you are seeking to add a position in BILL it would be prudent to assess the other stocks in that group. INTU FICO ML COIN VERX NCNO INTA...etc...
I will create a video to help explain this as it is really important for those who want to hold a stock longer term. The video will be placed in the education center.
Thank you for that great question!
Thanks so much for both the written explanation and the video. Appreciate it. I created a short list of IPO's a few weeks ago I'd like to target for possible longer holds and Bill was on this list. Thus when you also had it on your list it piqued my curiosity. Great advise you gave. Seems that VERX is also on your list and trading around the same multiple. Thanks again.