Jak wyceniać akcje przy pomocy P/S Ratio i dlaczego większość osób robi to źle?

Summary

The Price to Sales (P/S) ratio is a popular tool for evaluating whether stocks are overvalued or undervalued. However, using it without context can lead to poor investment decisions. The key takeaway is that comparing the P/S ratio of a company to its historical averages, rather than to other companies, offers better insights. Analyzing revenue growth and historical ranges of P/S can lead to more accurate assessments, highlighting opportunities for better returns. The video uses examples like Nvidia and Broadcom to demonstrate how P/S should be evaluated with a relative perspective for effective investment strategies.

Takeaways

• 😀 The Price to Sales (P/S) ratio is commonly used to assess whether shares are overvalued, undervalued, or fairly valued, but it's often used incorrectly by investors.
• 😀 A lower P/S ratio might seem attractive, but investing in companies with the lowest P/S ratios often results in disappointing returns.
• 😀 Simulations show that investing in the 25 companies with the lowest P/S ratios in the S&P 500 index underperformed the S&P 500 benchmark over 10 years, with a return of 144% compared to 158%.
• 😀 Interestingly, investing in companies with the highest P/S ratios in the S&P 500 index actually outperformed the benchmark by 1% per year over 10 years.
• 😀 The problem with using P/S ratios in isolation is that they don't consider the growth potential of a company's revenue in the future, leading to misleading conclusions.
• 😀 A better way to evaluate P/S ratios is by comparing the current ratio to a company's historical averages, rather than using nominal P/S values alone.
• 😀 For example, Nvidia's higher P/S ratio compared to Broadcom can be justified by Nvidia's higher expected revenue growth (50% annually) compared to Broadcom's (25% annually).
• 😀 The effectiveness of the P/S ratio improves when considering relative values, such as comparing a company's current ratio to its historical range, rather than against other companies.
• 😀 A P/S ratio close to the historical lower limit signals a potential investment opportunity, while one near the upper limit suggests the company may be overvalued.
• 😀 Using historical data to establish a median P/S ratio for a company provides a better framework for understanding whether the company is overvalued or undervalued.
• 😀 If the current P/S reading is significantly above the median, the company might be overvalued, but a slight overvaluation doesn't necessarily mean an immediate sell-off; it may just signal a cautious approach.

Q & A

What is the Price to Sales (P/S) ratio, and why is it commonly used?

The Price to Sales ratio is the ratio of a company’s market value (price of a single share) to its total revenue. It’s a popular tool for assessing whether shares are overvalued, undervalued, or fairly valued.

What is the theory behind the Price to Sales ratio?

The theory suggests that the lower the Price to Sales ratio, the more attractive the stock is, as it indicates a better value for investors. A lower ratio is thought to signal that shares are undervalued.

Why is using the Price to Sales ratio in isolation a mistake?

Using the Price to Sales ratio in isolation is a mistake because it doesn’t account for the growth prospects of the company. Even stocks with high Price to Sales ratios can perform better if they have strong revenue growth.

What was the outcome of the simulation involving companies with the lowest Price to Sales ratios?

The simulation showed that selecting the 25 companies with the lowest Price to Sales ratios from the S&P 500 index each quarter over 10 years resulted in a return of 144%, which was lower than the 158% return from simply investing in an S&P 500 ETF.

How did investing in the companies with the highest Price to Sales ratio perform in the simulation?

Investing in the companies with the highest Price to Sales ratio outperformed the benchmark, achieving an average return of 1% higher per decade compared to the overall S&P 500 index.

What is the importance of comparing a company’s current Price to Sales ratio to its historical average?

By comparing the current Price to Sales ratio to its historical average, investors can better determine whether a stock is overvalued or undervalued relative to its past performance, accounting for growth trends.

Why did the comparison between Nvidia and Broadcom show that the nominal Price to Sales ratio isn’t a reliable indicator?

The comparison between Nvidia and Broadcom showed that the nominal Price to Sales ratio doesn’t consider the companies' future growth rates. Nvidia’s higher growth rate justifies its higher ratio, even though it seems more expensive in isolation.

What role does revenue growth play in the Price to Sales ratio?

Revenue growth is crucial in evaluating the Price to Sales ratio. Companies with higher expected growth can justify higher Price to Sales ratios, as investors anticipate better future returns from the same amount of current revenue.

What should investors do if they want to use the Price to Sales ratio effectively?

Investors should use the Price to Sales ratio in conjunction with historical data, comparing the current ratio to the company’s past averages. This approach helps identify whether the stock is overvalued or undervalued in relation to its historical performance.

What is the significance of the median Price to Sales ratio for a company?

The median Price to Sales ratio is an important benchmark for evaluating a stock. A ratio above the median suggests the stock is relatively overvalued, while a ratio below the median indicates it may be undervalued, offering a better buying opportunity.