I don’t think we should use short term price movements to confirm or refute anything. I’m pleased that many of my stocks are way up in a short period of time but in the short term that is nothing but noise. Stocks ebb and flow. The companies underlying performance is what matter.
Lets look at a couple of our stocks.
ZS- Its previous all time EV/S was 35. Today it hit 39. If you assume that next quarter will be around 60-70% growth over last year then once ZS reports in a few days they should be back down to an EV/S of 35. Personally I just see the market taking that into account and we are getting our price appreciation a little bit early. I think ZS has gotten a little ahead of itself but not horribly so.
OKTA- OKTA’s previous all time high EV/S was 26 when it was growing 60%. It is now growing 50% and its EV/S is up to 31. Lets say it has a solid beat next quarter and does a 130 million dollar quarter, its EV/S will still be around 28. Personally I think OKTA will need to accelerate its growth to or suddenly start throwing off tons of cash for it to justify that EV/S. I think OKTA is pretty overvalued right now unless it can do either of those two things.
MDB - Mongo’s high ev/s was 29, the stock price had fallen recently down to 130 which brought its EV/S down to 26.5. I see Mongo that has another couple of quarters of easy comps so it is going to put up some impressive revenue growth numbers. I bought more when its ev/s was at 26. I’m guessing next quarters growth will bring the ev/s back down to 26.5 so I personally think the stock has more room to run.
TWLO - TWLO’s high ev/s was 26, stock recently had a little rough patch which brought its ev/s down to 22. They were just getting to with in a range that I was interested in buying them as next quarter would have brought their EV/S down to the 20 range. I had a busy few days and missed buying them. Their price appreciation was just making up lost ground.
AYX - AYX has a high ev/s of 25, it is now 18.5. A little hard to compare because their old high was under ASC 605. I know some have worried aloud about slowing growth but so far we haven’t seen anything of the sort. We will see more variability in quarter to quarter numbers. I’ll take a 50-55% grower with 90% gross margins for an ev/s of 18 any day. Next quarter would bring their EV/S down to the 16 range. I’d buy more if I didn’t already own so much.
Finally, i think both SMAR and ESTC are good deals right now too. If ESTC continues its growth then its EV/S will drop to 22. It has been as high as 29 in the past which I think it will regain if the fears about amazon prove to be unfounded.
best,
Ethan
Anywho, buy the companies that are rocking their businesses. The numbers don’t lie for the most part…but they don’t look forward very well.
best,
Ethan